Securities and Exchange Commission
Litigation Release No. 17337 / January 24, 2002
SEC Obtains Temporary Restraining Order and Asset Freeze To Halt Pump-and-Dump Scheme Involving the Stock of Tel-One, Inc.
Securities and Exchange Commission v. Tel-One, Inc., et al., No. 8:02-CV-120-T-30TGW, (M.D. Fla., filed January 22, 2002).
The Securities and Exchange Commission (SEC) announced that on January 22, 2002, it filed a complaint and obtained a temporary restraining order (TRO) against Tel-One, Inc., a Tampa-based company, and certain of its principals and promoters. The SEC's complaint alleges that Tel-One and defendant Media Broadcast Solutions, Inc. (Media Broadcast), a Tampa stock promoter, and certain of their principals have been involved in a pump-and-dump scheme that included false statements in advertisements in local and national newspapers, including the January 16, 2002 edition of the Wall Street Journal. The SEC's complaint and its motion for a temporary restraining order allege that the defendants, some of whom have recent felony convictions, dumped hundreds of thousands of Tel-One shares during their pump-and-dump scheme.
The TRO issued by the Court enjoins Tel-One, Media Broadcast, W. Kris Brown (Tel-One's president), George Carapella (a Tel-One director at the time of the misconduct), Alan S. Lipstein (a former Tel-One director) and George LaFauci (Carapella's cousin and a principal of Media Broadcast) from violating the antifraud provisions of the federal securities laws, and freezes their assets.
According to the SEC's complaint and motion for a TRO, Tel-One is a start-up company in the videoconferencing industry. The SEC alleges that Carapella, who has multiple fraud convictions, and Lipstein, who is awaiting sentencing on a federal money laundering conviction, control both Tel-One and Media Broadcast. Since November 2001, Media Broadcast has sent unsolicited mass fax messages to prospective investors and published advertisements in local and national newspapers that make false claims regarding, among other things: (a) that investors should buy Tel-One stock "now" and that Tel-One is a good investment, when, in fact, Carapella and Lipstein were dumping hundreds of thousands of Tel-One shares; (b) that Tel-One's stock price (which was quoted at approximately $2.50 per share at the time of the trading suspension) will reach a target of $21 per share; and (c) that Tel-One is at the forefront of the videoconferencing industry and has a network of relationships with Fortune 2000 companies. The SEC also alleges that the defendants have tried to capitalize on the September 11, 2001 terrorist attacks by touting Tel-One as a leader in the videoconferencing industry, which the defendants claim will grow substantially as a result of travel and safety concerns.
Carapella and Lipstein paid for all of Tel-One's and Media Broadcast's touting activities, according to the SEC's motion for a TRO, including the recent Wall Street Journal advertisement. The SEC also alleges that since late November 2001, Carapella and Lipstein, through companies they control, have sold approximately $1.7 million worth of Tel-One stock.
The SEC's complaint alleges that the above conduct violated the anti-fraud provisions of the federal securities laws, specifically Section 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 also announced that it had suspended trading in Tel-One stock effective at 9:30 a.m. on January 23, 2002. See Securities Exchange Act Of 1934 Release No. 45323 (January 23, 2002). The SEC wishes to acknowledge the assistance of NASDR, Inc. in this matter.