U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19843 / September 22, 2006
SEC v. Dennis Watts, Individually and D/B/A Senior Benefit Plans and James Nathan Grimes, Civil Action No. 5-02CV-0109-C, United States District Court for the Northern District of Texas, Lubbock Division
SEC Settles Charges in Connection With Fraudulent Pay Telephone Scams
On September 8, 2006, the Honorable Sam R. Cummings of the United States District Court for the Northern District of Texas signed final judgments against defendants Dennis B. Watts and James Nathan Grimes. The judgments permanently enjoin Watts and Grimes from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Watts was found liable for disgorgement of $550,710, representing monies gained as a result of the conduct alleged in the Commission's complaint, and prejudgment interest of $125,420, for a total of $676,130. Grimes was found liable for disgorgement of $156,310, representing monies gained as a result of the conduct alleged in the Commission's complaint, and prejudgment interest of $25,512, for a total of $181,822. The judgments waive payment of disgorgement and prejudgment interest based on the sworn financial statement and other information each defendant submitted to the Commission.
The Commission's complaint alleged that the defendants made multiple misrepresentations about the safety and security of investments in pay telephone lease programs offered by Alpha Telcom, Inc., and Phoenix Telecom, L.L.C. The Commission previously filed suit against Alpha Telcom and Phoenix Telecom, obtaining permanent injunctive relief against each issuer to halt their securities offerings. Watts and Grimes consented to the entry of the final judgment without admitting or denying the allegations in the Commission's complaint. In addition, Watts and Grimes consented to the entry of a Commission order barring them from associating with a broker or dealer based on the entry of the final judgment in the civil proceeding.