U.S. Securities and Exchange Commission
Litigation Release No. 16742 / September 29, 2000
SEC v. Tutornet.com Group, Inc. and Euburn R.A. Forde, Civil Action No. 00-1472-A (U.S.D.C. E.D.Va., Alexandria Division)
On September 29, 2000, the Honorable Leonie M. Brinkema entered an Order of Preliminary Injunction and Other Relief against defendants Tutornet.com Group, Inc., ("Tutornet") and Euburn R. A. Forde ("Forde"), Tutornet's president. The Order was entered following a hearing in United States District Court for the Eastern District of Virginia. Among other things, the Order preliminarily enjoins Tutornet and Forde from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder; preliminarily enjoins Tutornet from violating Section 13(a) of the Exchange Act and Rules 12b-20, 13a-11 and 13a-13 thereunder; and preliminarily enjoins Forde from aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-11 and 13a-13 thereunder. The Order also sets October 10, 2000 as the date for the hearing on the Commission's request for the entry of a permanent injunction and the imposition of civil penalties against Tutornet and Forde.
On August 29, 2000 the Commission filed a complaint against Tutornet and Forde, alleging that they made false and misleading statements, and omitted to state material information, in a Form 8-K filed with the Commission on May 18, 2000, and in a January 2000 letter to shareholders ("Shareholder Letter") published on Tutornet's website, in an effort to lull current and prospective investors into a false sense of security in the face of Tutornet's precarious financial condition. The Complaint also alleges that Tutornet's Form 10-Q filed with the Commission on August 21, 2000 was deficient because it failed to include a statement of cash flow.
Among other things, the Complaint alleges that Tutornet's Form 8-K, signed by Forde, made misleading statements and failed to disclose material information concerning Tutornet's relationship with America Online, Inc. ("AOL"). Specifically, the Complaint alleges that Tutornet falsely stated in the Form 8-K that it was in the process of "co-branding" with AOL, which would result in a revenue sharing arrangement with AOL that would provide the financially troubled Tutornet with access to over 18 million AOL subscribers, and the potential to generate annual revenues of $324 million. In addition, the Complaint alleges that Tutornet and Forde made false and misleading statements in the Form 8-K concerning a prospective $30 million investment in Tutornet by Princeton Investments, Ltd., purportedly a Bahamian company. The Complaint also alleges that Tutornet made false statements and failed to disclose material information concerning its relationship with the United States Department of Housing and Urban Development ("HUD"). Specifically, the Complaint alleges that Tutornet falsely stated in the Shareholder Letter that HUD planned to "roll out" Tutornet's services to more than 1000 housing sites across the country upon the successful completion of a pilot program. While the statement concerning the pilot program was true, the Complaint alleges that the statement concerning the "roll out" of Tutornet's services was false. Finally, the Complaint alleges that Tutornet's Form 10-Q filing with the Commission on August 21, 2000 was deficient because it did not contain a statement of cash flow, as required by Commission rules.