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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19849 / September 27, 2006

SEC v. The Children's Internet, Inc., Nasser V. Hamedani, Sholeh A. Hamedani, Peter A. Perez, Cort L. Poyner and Two Dog Net, Inc., Case No. C 06-6003 CW (N.D. CA filed on September 27, 2006)

SEC Charges Northern California Educational Software Company for Fraudulent Stock Offering

The Securities and Exchange Commission today charged the principals of The Children's Internet, Inc., a Pleasanton, California-based company, with defrauding investors out of approximately $5.5 million. The Commission's complaint alleges that, unbeknownst to investors, only a tiny fraction of the money raised funded corporate operations, with the majority instead going towards luxury automobiles, gambling debts, and other personal expenses of the principals. Named in the Commission's action are The Children's Internet, Inc., Chief Executive Officer Sholeh A. Hamedani, 39, and her father, Nasser V. Hamedani, 68, both of Danville, Calif.

In its complaint, filed in federal court in San Francisco, the Commission alleges that the Hamedanis fraudulently induced investors to purchase approximately 2.7 million shares of stock in The Children's Internet, a company which sells subscriptions to a children's internet product, by misrepresenting and omitting key facts. According to the Commission, investors were told, among other things, that the shares could be freely traded and would be listed on a national stock exchange shortly, none of which was true.

The complaint also alleges that the Hamedanis did not inform investors that up to 25% of their investment would be paid as commissions to two stock promoters, or that some of the stock proceeds were being secretly funneled back to the Hamedanis and to Two Dog Net, Inc., a company they controlled.

The Commission's complaint also charges The Children's Internet and Sholeh Hamedani with making false filings with the Commission in furtherance of the scheme to defraud investors, and, in June 2005, filing a false restatement of previous financial statements in an effort to cover up the scheme.

Also charged in the Commission's complaint are two stock promoters, Peter A. Perez, 40, of Boca Raton, Fla., and Cort L. Poyner, 37, of Delray Beach, Fla. The Commission charges Perez and Poyner with assisting in the sale of unregistered stock and making false statements and omitting material facts to induce investors to buy stock.

The Commission's complaint charges that Sholeh and Nasser Hamedani, Peter Perez, Cort Poyner, The Children's Internet Inc., and Two Dog Net, Inc. violated the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, as well as the federal registration provisions, Sections 5(a) and 5(c) of the Securities Act. The promoters are charged with acting as unregistered broker-dealers (Section 15(a) of the Exchange Act). The complaint also charges Sholeh Hamedani with causing The Children's Internet to report false financial information to the Commission (Section 13(a) of the Exchange Act and the related Rules); and with causing The Children's Internet's failure to maintain accurate books and records and adequate internal controls (Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act). The complaint also charges Sholeh Hamedani with circumventing internal accounting controls (Section 13(b)(5) of the Exchange Act); with falsifying the company's books and records (Rule 13b2-1 under the Exchange Act); with lying to the accountants (Rule 13b2-2 under the Exchange Act) and falsely certifying The Children's Internet's financial statements (Rule 13a-14 under the Exchange Act). Sholeh Hamedani is further charged with failing to report changes in her ownership of The Children's Internet stock (Section 16(a) of the Exchange Act).

The Commission's lawsuit ultimately seeks the return of all ill-gotten investor funds as well as penalties and other relief from the defendants, including permanent injunctive relief, officer and director and penny stock bars against the Hamedanis, and penny stock bars against Poyner and Perez.

SEC Complaint in this matter

 

http://www.sec.gov/litigation/litreleases/2006/lr19849.htm


Modified: 09/27/2006