SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17003 / May 16, 2001
Securities and Exchange Commission v. Phoenix Telecom, L.L.C., Jerold Benjamin Clawson, Jerry Deland Beacham and H. Ellis Ragland, Jr., Civil Action File No. 1:00-CV-1970-JTC (N.D.Ga.)
The Securities and Exchange Commission ("Commission") announced today that on May 9, 2001, the Honorable Jack T. Camp of the United States District Court for the Northern District of Georgia entered orders of permanent injunction and other relief against Jerold Benjamin Clawson ("Clawson") and Jerry Deland Beacham ("Beacham") for engaging in fraud in the offer and sale of unregistered securities in the form of investment contracts in a scheme involving pay telephone leasebacks through the company of Phoenix Telecom, L.L.C. ("Phoenix"). The Commission alleged that the defendants promoted a massive fraudulent scheme through the use of insurance agents and over the Internet, in which Phoenix raised more than $74 million from more than 2,000 mostly elderly investors. The Court ordered that Clawson pay disgorgement in the amount of $2,700,000, but waived payment in excess of $558,000 based upon Clawson's demonstrated inability to pay beyond that amount. The Court ordered Beacham to pay disgorgement in the amount of $2,000,000, but waived payment in excess of $150,000 based upon Beacham's demonstrated inability to pay beyond that amount. Judge Camp ordered that disgorgement be paid directly into the receivership for Phoenix for the benefit of the defrauded investors.
Following a hearing on the merits earlier, the Court concluded that the scheme was based upon purported investments in customer owned, coin-operated telephones offered and sold in units, involving a telephone, site lease, lease/back agreement and buy/back agreement, that constitute securities, and further concluded that no registration statement was filed with the Commission in connection with these securities. Phoenix was the source of lease payments on the telephones and was the insurer of the investment and investors were not told that Phoenix was losing money, had a negative net worth, and was dependent on revenue from new investors to sustain its operations.
The Court's orders permanently enjoined defendants Clawson and Beacham from future 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 Rule 10b-5 thereunder.