U.S Securities and Exchange Commission

Litigation Release No. 16760 / October 10, 2000

Securities and Exchange Commission v. ETS Payphones, Inc. and Charles E. Edwards, Civil Action File No. 1:00-CV-2532-JTC (N.D. Ga.) (Filed September 29, 2000)

The Securities and Exchange Commission ("Commission") announced that it filed a complaint in the United States District Court for the Northern District of Georgia on September 29, 2000, against ETS Payphones, Inc. ("ETS") and Charles E. Edwards ("Edwards"). The complaint seeks permanent injunctions against ETS and Edwards and a freeze of Edwards' assets. The complaint alleges that ETS and Edwards engaged in fraud in the offer and sale of unregistered securities in the form of investment contracts.

The Commission's complaint alleges that the defendants promoted a massive fraudulent scheme through the use of insurance agents, financial planners, marketing companies, and over the Internet, in which ETS raised more than $300 million from over 10,000 investors. The complaint asserts that the scheme is based upon purported investments in customer owned, coin-operated telephones offered and sold in units, involving a telephone, site lease, lease/back agreement and buy/back agreement, that constitute securities. No registration statement was filed with the Commission in connection with these securities. The complaint also asserts that investors were not told that ETS was losing money, had a negative net worth, and was dependent on revenue from new investors to sustain its operations.

The complaint seeks permanent injunctions against defendants ETS and Edwards to prevent future violations of Sections 5(a), 5(c) and 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 complaint also seeks an accounting, disgorgement and prejudgment interest as well as civil penalties from the defendants.