SEC.gov | Global Telelink Services, Inc., Global Contact Corporation, and Robert Smith III

Litigation Release No. 18313 / August 28, 2003

Securities and Exchange Commission v. Global Telelink Services, Inc., Global Contact Corporation, and Robert Smith III, United States District Court for the Northern District of Georgia, Civil Action No. 1:01-CV-0632 MHS

The Securities and Exchange Commission announced that on August 1, 2003, the Honorable Marvin H. Shoob, United States District Judge for the Northern District of Georgia, entered judgments of permanent injunction as to Global Telelink Services, Inc. ("GTS"), Global Contact Corporation ("Global Contact") and Robert Smith III ("Smith"), restraining and enjoining them from further violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

The defendants consented to the entry of the judgment without admitting or denying any of the allegations of the Commission's complaint. The Court ordered disgorgement against Smith in the amount of $478,891, plus $53,351 in prejudgment interest, but waived payment due to Smith's demonstrated financial inability to pay. The Court did not order Smith to pay a civil penalty based on Smith's demonstrated financial inability to pay.

The Commission's complaint alleged that GTS, Global Contact and Smith operated a Ponzi scheme that raised more than $10 million from more than 300 mostly elderly investors. The Commission's complaint alleged that the GTS scheme was based upon purported investments in customer owned, telephone gateway switches offered and sold in units, involving a switch, lease/back agreement and buy/back agreement, that constituted securities. The complaint further alleged that the Global Contact scheme was based upon purported investments in workstations in purported telephone call centers, offered and sold in units, involving a call center workstation, lease/back agreement and buy/back agreement, that constituted securities. No registration statement was filed with the Commission in connection with either of these securities. The complaint alleged that GTS and Global Contact devised and controlled both investments and directly made all payments to investors. Investors were not told that GTS and Global Contact had no operating revenues and that all payments to investors in either scheme were made with money raised from subsequent investors.