U.S. Securities and Exchange Commission
Litigation Release No. 17089 \ August 3, 2001
Securities and Exchange Commission v. Phoenix Telecom, L.L.C., Jerold Benjamin Clawson, Jerry Deland Beacham and H. Ellis Ragland, Jr., Civil Action File No. 1:00-CV-1970-JTC (N.D.Ga.)
The Securities and Exchange Commission ("Commission") announced today that on July 30, 2001, the Honorable Jack T. Camp of the United States District Court for the Northern District of Georgia entered an order directing H. Ellis Ragland ("Ragland") to disgorge $1,782,666 in ill-gotten gains as a result of his violations of the federal securities laws. The Court also ordered Ragland to pay a "third tier" civil penalty in the amount of $110,000. The Court ordered that both payments be made within 30 days of the entry of the order.
In a prior order dated August 10, 2000, Ragland was permanently enjoined from 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. Ragland consented to the entry of permanent injunction, without admitting or denying the allegations.
Ragland, Jerold Benjamin Clawson ("Clawson") and Jerry Deland Beacham ("Beacham") engaged in fraud in the offer and sale of unregistered securities in the form of investment contracts in a scheme involving pay telephone leasebacks through Phoenix Telecom, L.L.C. ("Phoenix"). The Commission alleged that the defendants promoted a massive fraudulent scheme through the use of insurance agents and over the Internet, in which Phoenix raised more than $74 million from more than 2,000 mostly elderly investors. Clawson and Beacham were permanently enjoined in a separate order and ordered to pay disgorgement and other relief.
In earlier orders, the Court had concluded that the scheme was 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 constituted securities, and further concluded that no registration statement was filed with the Commission in connection with these securities. Phoenix was the source of lease payments on the telephones and was the insurer of the investment and investors were not told that Phoenix was losing money, had a negative net worth, and was dependent on revenue from new investors to sustain its operations.
See also: L.R. 17003 (May 16, 2001); L.R. 16659 (August 18, 2000); L.R. 16642 (August 2, 2000)