UNITED STATES SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
SECURITIES EXCHANGE ACT OF 1934
ACCOUNTING AND AUDITING ENFORCEMENT
ADMINISTRATIVE PROCEEDINGS INSTITUTED AGAINST ISAAC HAGER TO DETERMINE WHETHER HE CAUSED VIOLATIONS OF THE ANTIFRAUD PROVISIONS OF THE FEDERAL SECURITIES LAWS
On September 27, 2000, the Securities and Exchange Commission instituted public administrative proceedings pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Isaac Hager ("Hager"), a former officer and director of Power Phone, Inc. ("Power Phone"), to determine whether Hager caused violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. The Division of Enforcement alleges that the senior management of Power Phone orchestrated a fraudulent scheme to falsify and inflate the company's financial condition in filings with the Commission. Power Phone accomplished the fraudulent scheme by claiming in filings with the Commission to own two assets, consisting of software and artwork, even though Power Phone did not own either asset. These two assets, which comprised ninety-five percent of Power Phone's total assets, were falsely valued at $4 million in Power Phone's audited financial statements for the fiscal year ended June 30, 1995. Power Phone included those false financial statements in an Annual Report on Form 10-K that was filed with the Commission in 1995, and a Form 10 registration statement that was filed with the Commission in 1996. The Division alleges that as an officer and director of Power Phone, Hager signed and reviewed Power Phone's annual report and registration statement with knowledge that these documents would be filed with the Commission. Although Hager, one of only three officers of Power Phone, had never seen the ASAP software or the artwork, he failed to take any steps either to verify the existence of the assets or assure himself of the value of the assets which comprised ninety-five percent of Power Phone's balance sheet. Based on these facts, the Commission instituted public administrative proceedings to determine whether Hager caused violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder.
A hearing before an administrative law judge will be scheduled to determine whether the allegations in the Order are true and to determine what remedial action, if any, is appropriate in the public interest.
See also In the Matter of Joseph Salamon, Exch. Act Rel. No. 42125 / November 10, 1999; SEC v. Noah Steinberg et. al, Civ. Action No. 99-6050 (E.D.N.Y.)(RJ) Lit. Rel. No. 16303 (September 28, 1999); In the Matter of Michael, Adest & Blumenkrantz, P.C., David Michael and Paul Adest, Exch. Act Rel. No. 41284; AAER Rel. No. 1125 (April 14, 1999).