U.S. Securities and Exchange Commission
Litigation Release No. 16784 / October 30, 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 October 23, 2000, the Honorable Leonie M. Brinkema of the United States District Court for the Eastern District of Virginia entered an Agreed Order of Permanent Injunction against defendants Tutornet.com Group, Inc. ("Tutornet") and Euburn R. A. Forde ("Forde"), Tutornet's president. The Order permanently 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; permanently enjoins Tutornet from violating Section 13(a) of the Exchange Act and Rules 12b-20, 13a-11 and 13a-13 thereunder; and permanently 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 requires Tutornet to file with the Securities and Exchange Commission ("Commission") within 30 days, (a) an amended Form 8-K, which shall correct statements made therein concerning America Online, Inc. ("AOL") and Princeton Investments, Ltd. ("Princeton"); and (b) an amended Form 10-K for the period ending June 30, 2000 which shall include a statement of cash flows. Finally, the Order requires Forde to pay a civil money penalty in the amount of $55,000. Tutornet and Forde consented to the entry of the Order, without admitting or denying the allegations in the Commission's Complaint.
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 alleged 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 AOL. Specifically, the Complaint alleged 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 alleged that Tutornet and Forde made false and misleading statements in the Form 8-K concerning a prospective $30 million investment in Tutornet by Princeton, purportedly a Bahamian company. The Complaint also alleged 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 alleged 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 alleged that the statement concerning the "roll out" of Tutornet's services was false. Finally, the Complaint alleged 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.