3 factors that could cause the checker:
1. Ensure the .QC file points to the correct material directory
2. Check the formating of your VMT file, make sure it's vertexlit
also use "$model" "1"
3. Check there's no errors when compiling the SMD (problem I had)
If you have an error during export to SMD the log will tell you which object is the problem. In Max press "H" to "Select from Scene" and you can select the problem by name.