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U.S. Securities and Exchange Commission


Litigation Release No. 16511 / April 10, 2000

Securities and Exchange Commission v. Empower Telecommunications Corp., William H.B. Chan, et al., Civil Action No. 96-6815 (WDK)(VAPx)

The Securities and Exchange Commission announced that on April 5, 2000, the Court entered a judgment of permanent injunction against, and ordered the payment of disgorgement by, the former Chairman of a defunct corporation which sought to provide telephone services in Indonesia. The judgment was entered against defendant William H.B. Chan for violating the registration and antifraud provisions of the federal securities laws. Chan consented to the entry of the judgment without admitting or denying the allegations in the Commission's Complaint.

The Complaint filed by the Commission alleged that the Defendants, including Chan, sold approximately $6.56 million of unregistered securities to about 350 investors in three alleged private placements. The investors were told that the proceeds would be used to build and operate telephone exchanges in Indonesia. In fact, approximately $1.2 million of the offering proceeds were misused to pay unrelated and undisclosed expenses of Chan and a related corporation. The Complaint further alleged that the Defendants misrepresented the existence of a purported agreement between the Company and a major telecommunications company, the value of the Company's assets, and the existence of a purported independent audit by a nationally recognized public accounting firm. No operating telephone services were ever provided by the Defendants in Indonesia or elsewhere.

The Final Judgment enjoins Chan from 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 Rules 10b-5 and 10b-9 thereunder. The Court also barred Chan from serving as an officer or director of any public company registered with the Commission for a period of five years. The Final Judgment ordered Chan to disgorge the sum of $2.5 million but requires actual payment of $250,000 based upon Chan's financial representations of inability to pay the full amount of disgorgement.

The Complaint, which was filed on September 26, 1996, named five Defendants. Defendants Empower Telecommunications Corp and Osvaldo N. Lorenzetti had earlier consented to the entry of Permanent Injunctions. A default was entered against W.H.B. Chan & Co. and Donald E. Whorl consented by Offer of Settlement to the entry of an administrative cease and desist order as a resolution of the litigation.