SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17205 / October 25, 2001
Securities and Exchange Commission v. Internet Broadcast Group, et al., Civil Action No. 96CV02226 (RCL) (D.D.C.)
COURT ENTERS FINAL JUDGMENT AGAINST JOHN LARSON AND COMMONWEALTH COMMUNICATIONS GROUP IN WIRELESS CABLE FRAUD
The Securities and Exchange Commission announced that on October 9, 2001, the Honorable Royce C. Lamberth, United States District Court Judge for the District of Columbia, entered a Final Judgment of Permanent Injunction and Other Relief as to John Larson and Commonwealth Communications Group (CCG). According to the Commission's complaint, which was filed on September 26, 1996, these two defendants violated various registration and antifraud provisions of the federal securities laws in connection with the offer and sale to the public of securities designated as partnership units in Internet Broadcast Group, a purported general partnership formed to engage in the wireless and hardwired cable business in Muskegon, Michigan and Mesa, Arizona. The complaint alleges that Larson and CCG, his wholly controlled company, functioned as brokers in selling the securities without first having registered as such as required by applicable securities laws. Further, Larson and CCG used a variety of false and misleading sales literature, correspondence and telephone statements to sell the securities.
The final judgment orders the defendants Larson and CCG, jointly and severally, to pay disgorgement of $270,978, $174,560 in prejudgment interest and a $270,978 penalty. The disgorgement amount represents the amount of investor funds allegedly received by the defendants as a result of their unlawful conduct. The final judgment enjoins each of these defendants from violating the antifraud provisions of 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. The final judgment also enjoins Larson and CCG from violating the securities registration provisions of Sections 5(a) and (c) of the Securities Act. Further, the final judgment enjoins defendants Larson and CCG from violating the broker-dealer registration provisions of Section 15(a) of the Exchange Act. Larson and CCG agreed to the entry of the final judgment without admitting or denying the allegations in the Commission's complaint.
Larson and CCG have been defendants in other Commission lawsuits. In SEC v. Internet Telecommunications Albany System SMR, et al., filed March 2, 1999, Larson and CCG were charged with violations of various registration and antifraud provisions of the federal securities laws in connection with the sale of securities in three general partnerships organized to develop specialized mobile radio systems, i.e. paging systems. Default judgments were entered against Larson and CCG (1) enjoining them from future violations of the federal securities laws and (2) ordering them to pay, jointly and severally, $385,648 disgorgement, $145,052 in prejudgment interest, and a $385,648 penalty. (See Litigation Release Nos. 16073 and 16660)
Additionally, in SEC v. David A. Colvin, et al., filed February 20, 1998, Larson was charged with federal securities laws violations in connection with the offering of 120-day demand notes to investors. Larson consented to an injunction against future violations of the federal securities laws, without admitting or denying the allegations in the Commission's complaint. Subsequently, the Court ordered Larson to pay disgorgement of $224,513 together with interest of $12,435, and a penalty of $224,513. Larson, however, failed to make the required payments, and on August 16, 1999, the Court found him in contempt and ordered him into custody. On February 29, 2000, Larson was indicted on a variety of charges, including securities fraud based on his alleged conduct in SEC v. Colvin, et al. On or about September 17, 2001, Larson pled guilty to two counts each of securities fraud and mail fraud. (See Litigation Release Nos. 15651, 15683, 16142 and 16255)