Litigation Release No. 17157 / September 27, 2001
Securities and Exchange Commission v. WARPnet Holdings, LLC, WARPnet, Inc., and Kevin A. Tauber, Civil No. 2:98CV884B (USDC Utah)
On July 9, 2001, the Honorable Dee Benson, United States District Judge, District of Utah, signed an Order Granting Motion for Summary Judgment and Judgment of Permanent Injunction and Other Relief against WARPnet Holdings, LLC, a Missouri limited liability company, WARPnet, Inc., and Kevin A. Tauber. The defendants were enjoined from future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Act of 1934 and Rule 10b-5 thereunder.
The Commission's Complaint, filed December 11, 1998, alleged that Tauber and Warpnet sold units in WARPnet to investors in Utah and California by telling potential investors that they would receive a percentage of the profits to be realized by WARPnet from its service contracts with the Church of Jesus Christ of Latter-day Saints, the Salt Lake Organizing Committee for the Olympic Winter Games of 2002, the Western Governors' University, the Rolling Stones rock band, and other entities, and that WARPnet would repurchase any interests after one year at a profit to the investor of $2 per unit.
The Court found that WARPnet and Tauber solicited funds from investors by selling "units" or "profits interest" of WARPnet or companies associated with WARPnet and that Tauber raised approximately $100,000 from investors by claiming that he "personally knew" and was "good friends with" Utah Governor, Michael O. Leavitt, and Gordon B. Hinckley, president of the Church of Jesus Christ of Latter-day Saints. Among other material misrepresentations, Tauber stated that his company had signed an agreement with four major television networks, the Salt Lake Organizing Committee, and the Western Governors' University, none of whom had ever personally or professionally heard of Tauber or WARPnet. The Court found that by engaging in such conduct, WARPnet and Tauber violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder.
Defendants WARPnet and Tauber were ordered to pay disgorgement and prejudgment interest totaling $131,290.75. In addition, Tauber individually was ordered to pay additional disgorgement and prejudgment interest totaling $8,300.75. A civil penalty in an amount to be determined by motion of the SEC was also imposed on Tauber.