U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18108 / April 25, 2003
S.E.C. v. Dale Carone, et al., Docket No. CV 03 374NM (FMOx) (USDC C.D. Cal.)
On April 8, 2003, the Honorable Nora Manella, U.S. District Judge, Central District of California, issued final judgments of permanent injunction against LinkNet, Inc. (LinkNet) and LinkNet de America Latina, Ltd. (Latina). The two companies were enjoined from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Act of 1934 and Rule 10b-5 promulgated thereunder. LinkNet and Latina consented to the orders without admitting or denying the Commission's allegations.
The Commission charged LinkNet, Latina, Allen R. Johnson, Joseph W. Isaac and Dale R. Carone with the fraudulent offer and sale of unregistered securities of LinkNet and Latina. The complaint alleges the defendants conducted these offerings from August 1999 through October 2000 and raised approximately $17 million from investors by selling the stock through a boiler room established by Johnson, Isaac and Carone in Encino, California.
The complaint alleges that in making the offering the defendants failed to disclose the fact that at least $5.1 million, or thirty percent, of the offering proceeds were paid as commissions to the boiler room operations. It also alleges that the defendants made false representations that: (1) a public offering of LinkNet stock was imminent; (2) LinkNet's stock would shortly be listed on NASDAQ; (3) investors could realize phenomenal returns on their investment in a short time; and (4) LinkNet and Latina had contracts for the sale of long-distance service in the United States and Mexico that would generate millions of dollars in revenue to the companies. The complaint also alleges that, while the offerings were ongoing, Isaac, Carone, and Johnson also sold their personal shares of LinkNet and Latina stock through the Encino boiler room and by other means.
Although LinkNet and Latina have settled the Commission's action, litigation is still pending against Johnson, Isaac, and Carone.