UNITED STATES SECURITIES AND EXCHANGE COMMISSION

LITIGATION RELEASE NO. 16626 / July 13, 2000

SECURITIES AND EXCHANGE COMMISSION V. STADTT MEDIA, L.L.C., ANTHONY B. BENAVIDES, ROBERT M. MARTINEZ, JEFFERSON F. SANTOS, AND LANA M. ST. MARTIN (DEFENDANT SOLELY FOR PURPOSES OF EQUITABLE RELIEF) Civil Action No. 3-00CV1489-P (N.D. Texas, Dallas Division)

SEC HALTS FRAUDULENT SECURITIES OFFERING BY
PURPORTED INTERNET COMPANY

The Securities and Exchange Commission ("SEC") announced that on July 12, 2000, it filed a civil action in U.S. District Court for the Northern District of Texas to halt a fraudulent securities offering by a Dallas company which claims to operate an Internet business. U.S. District Judge Sydney Fitzwater granted the SEC's request for a temporary restraining order, asset freeze and the appointment of a Receiver for the benefit of defrauded investors. Named as defendants or relief defendants in the suit are:

  • Stadtt Media, L.L.C., a Texas limited liability company formed in December 1999 purportedly to market magazines on an Internet website called C-Magazines.com. According to its articles of organization, the authority to manage Stadtt Media is vested in a two-member board of managers.

  • Anthony B. Benavides, age 26 and a resident of Addison, Texas. Benavides is half owner, chief executive officer, and a manager of Stadtt Media.

  • Robert M. Martinez, age 31 and a resident of Plano, Texas. Martinez is executive vice-president and vice-president of marketing of Stadtt Media.

  • Jefferson F. Santos, age unknown, and a resident of Dallas, Texas. Santos is employed by Stadtt Media to solicit prospective investors for the company.

  • Lana M. St. Martin, age 27 and a resident of Addison, Texas. St. Martin is half owner, the company secretary, treasurer, and a manager of Stadtt Media. St. Martin received investor funds and/or assets purchased with investor funds. She is included in the lawsuit as a defendant solely for the purposes of equitable relief.

The Complaint alleges that since February 2000, Stadtt Media has been selling units of membership interest ("Units") to investors purportedly for the development of an Internet website called C-Magazines.com. The company claims in its offering materials that C-Magazines.com will enable computer users to read digitally-reproduced, mainstream magazines online and translate these magazines into 25 languages. The company represents that this website will be up and running within 30 days. To date, Stadtt Media has raised over $900,000 from approximately 50 investors.

According to the SEC's Complaint, Benavides, Martinez, and Santos are making materially false representations to investors in connection with the sale of the Units. Among other things, they are claiming (1) that the company owns patents or patents-pending on Internet-related inventions, (2) that a major investment banking firm is committed to underwriting a $100 million initial public offering ("IPO") for Stadtt Media which will result in a 16,000% return on an investment in the company's pre-IPO offering, and (3) that Stadtt Media would use the proceeds from the pre-IPO offering for working capital and for the development of C-Magazines.com. The SEC's complaint alleges that, in fact, Stadtt Media owns no patents or patents-pending, has never made arrangements with an investment banker to conduct an IPO, and that Benavides and Martinez have converted investor funds to their own use, buying, among other things, a $126,000 Ferrari sports car, two new Mercedes Benz automobiles for over $160,000, and Rolex watches for over $30,000. In addition, Benavides and Martinez used investor funds to lease two luxury apartments for themselves at a cost of $87,500 per year and to lease an apartment for St. Martin at a cost of $34,200 per year.

The Complaint charges the defendants with violating the securities registration and antifraud provisions of Sections 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking in the lawsuit permanent injunctions against future violations of the antifraud provisions of the federal securities laws and civil money penalties against Stadtt Media, Benavides, Martinez, and Santos. The SEC is further seeking disgorgement of ill gotten gains and prejudgment interest against Stadtt Media, Benavides, Martinez, and Santos, as well as St. Martin.

Investors are advised to read the SEC's "Cyberspace" Alert before purchasing any investment promoted on the Internet. The free publication, which alerts investors to the telltale signs of online investment fraud, is available on the Investor Assistance and Complaints link of the SEC's Home Page on the World Wide Web www.sec.gov. It can also be obtained by calling 800-SEC-0330.

Investors are also encouraged to report suspicious Internet offerings (or other suspicious offerings) via e-mail to enforcement@sec.gov. A user friendly form to assist you in making a report is available at the SEC Home Page www.sec.gov. Investors can also mail a report to SEC's Enforcement Complaint Center, Mail Stop 8-4, 450 Fifth Street, N.W., Washington, D.C. 20549.