United States Securities and Exchange Commission
Litigation Release No. 16706 / September 18, 2000
SECURITIES AND EXCHANGE COMMISSION v. FRED CARTER AND WENDELL CARTER, U.S. District Court for the District of Columbia, Civil Action No. 99-2848(PLF) (D.D.C.)
SEC OBTAINS FRAUD INJUNCTION AGAINST WENDELL CARTER IN WASHINGTON, D.C. BASED INTERNET TELEPHONY SCHEME
The Securities and Exchange Commission announced that on September 14, 2000, Judge Paul L. Friedman of the United States District Court for the District of Columbia entered an injunction prohibiting future securities fraud by Wendell Carter, formerly vice-president of corporate sales for American Telephone and Telecommunications Corporation (ATTC), a District of Columbia corporation purportedly set up to establish a long distance telephone service using Internet telephony technology.
The SEC's complaint, filed on October 27, 1999, alleges that Fred Carter, formerly president and chief executive officer of ATTC, and Wendell Carter violated the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, by selling to the public ATTC stock and joint venture interests in a series of fraudulent offerings targeted mainly to Washington, D.C. area residents.
The complaint alleges that from October 1996 through October 1997, Fred Carter and Wendell Carter, who are not related, made material misrepresentations and omissions in promotional mailings and seminars used to induce people to invest in ATTC. According to the complaint, the defendants falsely claimed, among other things, to have designed a revolutionary technology for routing phone calls using the Internet, that ATTC's stock price would at least triple within one year, and that ATTC had a strategic alliance with an Internet telephony product manufacturer that would help ATTC implement its telephone service. In fact, the complaint alleges, ATTC did not design any technology, but merely purchased Internet telephony products for use in investor demonstrations. In addition, there was no reasonable basis for ATTC's financial projections and there existed no alliance with an Internet telephony product manufacturer. Further, investors were not told that investor funds were largely being disbursed for the personal use of Fred Carter, his family, and Wendell Carter, rather than being spent on bringing the promised telephone service to market.
Wendell Carter, without admitting or denying the charges, agreed to settle the action and to accept certain sanctions. He is permanently enjoined from future violations of the antifraud provisions of the Securities Act and the Exchange Act. He is also ordered to pay disgorgement of investors' money with prejudgment interest and civil money penalties, although all but $5,000 of this amount is waived based upon his financial inability to pay more.
The SEC's litigation continues against Fred Carter. For more information about this case see Litigation Release No. 16396 (December 29, 1999).