U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 16165 / May 27, 1999

SECURITIES AND EXCHANGE COMMISSION v. HOME SHOPPING PARTNERS, TELSYS COMMUNICATIONS, INC., and ELEAZER I. HERACLEOPOLIS, Civil Action No. 99-5512 NM (Cwx) (C.D. Cal.)

COMMISSION SUES PROMOTERS OF INTERNET SHOPPING MALL

The Securities and Exchange Commission announced today that it sued a Los Angeles based operator of an Internet shopping service for fraud. The lawsuit, filed in federal court in Los Angeles, alleges that Home Shopping Partners, Telsys Communications, Inc., and Eleazer Heracleopolis committed fraud while raising over $1 million from investors in several states for a planned Internet "shopping mall."

The complaint alleges that investors were told that their money would be used to finance the development and operation of a retail home shopping outlet on the Internet. Using a combination of telephone sales tactics and glossy sales literature, defendants misrepresented the returns investors could expect, and misled investors concerning the use of their money. The defendants promised investors annual returns ranging from 10 to 216 percent, to be paid on a monthly basis in as little as four months from the date of investment, but no returns were ever paid. The defendants also told investors that their funds would be used for specific purposes while, at the same time, stating that no assurances were given that the money would be spent exactly as indicated. This boilerplate disclosure was inadequate to put investors on notice that the defendants intended from the outset to use a large portion of investor funds to benefit Heracleopolis and his sales force. Contrary to the representations made to investors, approximately 39 percent was used for purposes unrelated to the development of an Internet shopping mall, including payments to Heracleopolis, members of his family, sales representatives and the purchase of a commercial laundry. Finally, Defendants Telsys and Heracleopolis failed to register as, or become associated with, a broker dealer.

The Commission seeks permanent injunctions, disgorgement and civil penalties against defendants for violating Sections 5(a) and (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.