UNITED STATES OF AMERICA BEFORE THE SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7543 / May 27, 1998 SECURITIES EXCHANGE ACT OF 1934 Release No. 40027 / May 27, 1998 ADMINISTRATIVE PROCEEDING File No. 3-9391 ______________________________ : In the Matter of : ORDER MAKING FINDINGS AND : IMPOSING REMEDIAL SANCTIONS LLOYD JOHN NEWTON : PURSUANT TO SECTION 8A OF THE : SECURITIES ACT OF 1933 AND : SECTIONS 15(b), 19(h) AND 21C OF : THE SECURITIES EXCHANGE Respondent. : ACT OF 1934 ______________________________: I. The Securities and Exchange Commission instituted this administrative proceeding on September 5, 1997, pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934, against Lloyd John Newton to determine whether he violated Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. II. Mr. Newton has submitted an Offer of Settlement, which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, prior to a hearing pursuant to the Commission' s Rules of Practice, 17 C.F.R. 201.100 et seq., and without admitting or denying the Commission s findings or conclusions contained herein, except as to the Commission s finding of jurisdiction over him and the subject matter, which are admitted, Newton consents to the entry of this Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b), 19(h) and 21C of the Securities and Exchange Act of 1934. III. On the basis of this Order and Newton s Offer of Settlement, the Commission ======END OF PAGE 1====== finds<(1)> that: A. SUMMARY From mid-1992 through mid-1993, a Los Angeles boiler room operation named InterLink Data Network of Los Angeles, Inc. (InterLink Data) fraudulently sold at least $12 million of unregistered securities of InterLink Data and of two related limited partnerships (collectively, the InterLink securities) to over 450 customers nationwide. InterLink Data was established ostensibly to develop private, fully integrated telecommunication networks and video phone systems. In fact, InterLink had no business operations and existed only to sell worthless securities. B. RESPONDENT Lloyd John Newton, age 41, resides in Evergreen, Colorado. From September 1992 until April 19, 1993, he was a registered representative of Portfolio Asset Management/USA Financial Group, Inc. (PAM), a broker-dealer registered with the Commission. C. FACTS 1. The InterLink Data Fraud In or around July 1992, PAM entered a selling agreement with InterLink Data and began serving as the underwriter of the unregistered securities distributions of InterLink Data and its two limited partnerships, InterLink Fiber Optic Partners L.P. ( InterLink Fiber ) and InterLink Video Phone Partners L.P. ( InterLink Video). On November 15, 1993, the Commission obtained final judgments against InterLink Data, its principal, Michael Gartner, InterLink Fiber and InterLink Video which permanently enjoined them from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder. SEC v. InterLink Data Network of Los Angeles, Inc., InterLink Fiber Optic Partners L.P., InterLink Video Phone Partners L.P., and Michael Gartner, Civ. No. 93-3073 R (C.D. Calif.). The Findings of Fact and Conclusions of Law in that case found that the defendants sold over $12 million of InterLink securities through boiler rooms to approximately 450 investors nationwide by making various fraudulent statements. <(1)> The findings herein are made pursuant to Newton s Offer of Settlement and are not binding on any other person or entity named as a respondent in this or any other proceedings. ======END OF PAGE 2====== 2.Newton s Participation in the InterLink Data Fraud Newton sold InterLink Data s unregistered securities through the use of material misrepresentations and raised at least $700,000 from at least forty (40) investors. As a result of his sales efforts Newton received at least $75,000 in compensation from InterLink Data. He participated in InterLink Data s fraudulent sales operation by making representations to investors that he knew or should have known were materially false and misleading and by distributing offering materials to investors which he knew or should have known contained material misrepresentations and omissions. Newton offered and sold such securities by making, among others, the following materially false and misleading representations: (a)that InterLink Data owned sixteen patents or exclusive licenses on technology critical to developing a fiber optic network; (b)that InterLink Data was currently installing or had completed installing fiber optic cable; (c)that InterLink Data s common stock would shortly be publicly traded, when no efforts had been undertaken to list the stock for such trading; (d)that investors would receive high returns on their investments and the refund of their investments, when such statements lacked any reasonable basis if fact; (e)that InterLink Data would use proceeds raised from securities sales to develop and install a fiber optic network; and (f)that investors had sufficient net worth and/or income to be accredited investors when they did not, in order to attempt to make the InterLink securities exempt from registration requirement. Newton also: (g)failed to disclose that interest payments to investors derived from other investors proceeds; (h)minimized the risk of investing in a start-up company with no revenues or business operations other than sales of securities; (i)made projections of future business operations which lacked any reasonable basis in fact; and (j)caused investors to falsely certify their net worth and income in order to attempt to exempt the InterLink Data securities from registration requirements. Newton knew that InterLink Data claimed that its securities distributions were exempt from registration with the Commission pursuant to securities registration exemptions contained in Regulation D under the Securities Act. However, he disregarded the requirements of those exemptions by soliciting unaccredited investors nationwide through calls and cable television and radio advertisements. Newton told an unaccredited investor that the accreditation requirements were a formality and posed no prohibition to investing. He also promoted InterLink Data at one investor conference. IV. FINDINGS A.In view of the foregoing, the Commission finds that Newton willfully violated Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and B.The Commission finds that Newton has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay full disgorgement, a civil penalty, and prejudgment interest. The Commission has reviewed the sworn financial statement and other evidence provided by Newton and has determined that he does not have the financial ability to pay disgorgement of $75,000, a civil penalty, and prejudgment interest. V. ======END OF PAGE 3====== ORDER Based on the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Newton and impose the sanctions that are consented to in that Offer. Accordingly, IT IS HEREBY ORDERED: A.Pursuant to Section 8A of the Securities and Act 21C of the Exchange Act, that Newton cease and desist from committing or causing any violation and any future violation of Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; B.Pursuant to Section 15(b)(6) of the Exchange Act, that Newton be barred from association with any broker, dealer, investment adviser, investment company or municipal securities dealer, with the right to reapply for association after three years to the appropriate self-regulatory organization or, if there is none, to the Commission; C.That Newton shall pay disgorgement of $75,000 plus prejudgment interest, but that payment of all but $10,000 of such amount be waived based upon Newton s demonstrated financial inability to pay; D.Pursuant to Section 21C(e) of the Exchange Act, that Newton shall pay disgorgement of $10,000 to the United States Treasury, $5,000 within ten (10) business days of the entry of the Order in this matter and $5,000 within three (3) months after the entry of the Order. Such payments shall each be: (a) made by United States postal money order, certified check, bank cashiers check or bank money order; (b) made payable to the Securities and Exchange Commission; (c) delivered by certified mail (return receipt requested) to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, Virginia 22312; and (d) submitted under cover letter that identifies Lloyd John Newton as Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and check shall be sent to Carl A. Tibbetts, Assistant Chief Litigation Counsel, Trial Unit, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W, Stop 8-8, Washington, D.C. 20549; and E.That Division of Enforcement may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Newton provided accurate and complete financial information at the time such representations were made; (2) determine the amount of the disgorgement plus prejudgment interest and civil penalty to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Newton s Offer had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Respondent was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of disgorgement plus prejudgment interest and civil penalty to be imposed and whether any additional remedies should be imposed. Respondent may not, by way of defense against any such petition, contest the findings in this Order or the Commission's authority to impose any additional remedies that were available in the original proceeding. By the Commission. Jonathan G. Katz Secretary ======END OF PAGE 4======