Securities and Exchange Commission
Litigation Release No. 18173 / June 4, 2003
SEC Alleges Fraud Against Miami, Florida Communications Company In Connection With Unregistred Securities Offering
Securities and Exchange Commission v. Public Communication Services, Inc. n/k/a Sprawlnet.com, Inc., Alfredo Susi and Richard Balber, Case No. 03-20557-CIV-Lenard/Simonton (S.D. Fla., filed March 11, 2003).
The Securities and Exchange Commission (SEC) announced that on March 11, 2003, it filed a federal civil injunctive action against Public Communication Services, Inc. n/k/a Sprawlnet.com, Inc. (Sprawlnet) of Miami, Florida, Alfredo Susi, Sprawlnet's chief executive officer and president, and Richard Balber, one of Sprawlnet's top sales agents, seeking to permanently restrain them from violating the federal securities laws as a result of their alleged fraudulent, unregistered offering of Sprawlnet's securities. Simultaneously with the filing of the complaint, defendants, without admitting or denying the allegations in the complaint, consented to the entry of final judgments.
According to the SEC's complaint, Sprawlnet operated a "diversified communications services company" that concentrated in the pay telephone, prepaid phone card and Internet search engine/portal businesses and raised approximately $7 million through in-house sales representatives offering and selling Sprawlnet's stock. The complaint alleges that Sprawlnet's written offering materials contained material misrepresentations and omissions concerning, among other things (i) Sprawlnet's use of investor proceeds, (ii) commissions paid to Sprawlnet's sales representatives, (iii) the status of a purported upcoming Initial Public Offering of Sprawlnet's stock, and (iv) the Company's operations. Sprawlnet's unlicensed sales representatives repeated these misrepresentations in telephone solicitations and, among other things, expanded upon them regarding the safety of the investment and price predictions for Sprawlnet's stock.
As a result, the Commission charged Sprawlnet, Susi and Balber with 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 and Balber with violations of Section 15(a) of the Securities Exchange Act of 1934. The SEC sought, among other things, a permanent injunction against Sprawlnet, Susi and Balber as well as disgorgement of ill-gotten profits and a civil money penalty against Susi and Balber in its lawsuit.
On April 6, 2003, the Honorable Joan A. Lenard, United States District Judge for the Southern District of Florida, entered by consent, among other things, a final judgment of permanent injunction against all of the defendants. Balber was ordered to disgorge $348,034 with prejudgment interest of $29,387 and to pay a civil monetary penalty of $120,000. Susi was ordered to disgorge $852,197 with prejudgment interest. However, based upon Susi's sworn statement of financial condition and other representations, payment of such amount was waived and a civil monetary penalty was not imposed.