U.S. Securities and Exchange Commission
Litigation Release 21913 / April 1, 2011
Accounting and Auditing Enforcement Release No. 3256 / April 1, 2011
Securities and Exchange Commission v. Joseph J. Monterosso, et. al., Civil Action No. 07-61693 (S.D. Fla., initial complaint filed on November 21, 2007)
Court Grants Summary Judgment Against Defendants Joseph J. Monterosso And Luis Vargas
On March 31, 2011, the United States District Court for the Southern District of Florida granted the Commission's motions for summary judgment against the two remaining defendants in a civil action originally filed in November 2007. The judgment permanently enjoins Joseph J. Monterosso and Luis Vargas from violations of the antifraud and other securities law provisions. The Court ordered that a magistrate judge would determine the amount of disgorgement and penalties that the defendants would pay.
The Commission brought civil actions against Monterosso and Vargas in connection with GlobeTel Communications Corp., now Sanswire Corp. (GlobeTel). GlobeTel reported millions of dollars in telecommunications revenue from 2002 to 2006 that the Commission alleged were fake. Two former GlobeTel executives were sentenced to prison as a result of parallel criminal prosecutions. See U.S. v. Huff, 09-cr-60295-DMM (S.D. Fla.); U.S. v. Jimenez, 08-cr-60367-DTKH (S.D. Fla.). Sanswire Corp. and three former executives, including the two sentenced to prison, previously consented to the entry of judgments against them in the Commission's action.
The Commission's complaint against Monterosso and Vargas alleged that they created hundreds of false invoices that made it appear that GlobeTel's three wholly-owned subsidiaries, Centerline Communications, LLC (Centerline), Volta Communications, LLC (Volta), and Lonestar Communications, LLC (Lonestar) bought and sold telecom "minutes" with other wholesale telecom companies. The complaint alleged that, in reality, there were no transactions under the program that GlobeTel executives described as the "off-net" revenue program. It alleged that two of GlobeTel's subsidiaries - Volta and Lonestar - actually did no business. It alleged that the third subsidiary, Centerline, reported millions of dollars in business with Monterosso's and Vargas' own private company, Carrier Services Inc. ("CSI"), which did not occur.
The court found that the Monterosso and Vargas violated Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), Rule 10b-5(a) promulgated thereunder, and Section 17(a)(1) of the Securies Act of 1933 (Securities Act) by their direct involvement in a scheme to report fraudulent "off-net" revenue.
In addition, the court found that Monterosso and Vargas violated Rule 13b2-1 promulgated under the Exchange Act and aided and abetted GlobeTel's violated Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 promulgated thereunder.
The GlobeTel case was investigated and litigated by Brent Mitchell, Peter Rosario, Jeffrey Infelise, Gina Twyman and Reid Muoio.
For further information, please see Litigation Release Numbers 20371 (November 26, 2007) [initial complaint filed]; 20550 (May 1, 2008) [civil injunctive action filed against GlobeTel and three former executives]; and 21202 (September 9, 2009) [civil action filed against Timothy J. Huff].
The Commission acknowledges the assistance of the Internal Revenue Service, the Federal Bureau of Investigation, the Tax Division of the United States Department of Justice, and the United States Attorney's Office for the Southern District of Florida.