U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17408 / March 12, 2002
SECURITIES AND EXCHANGE COMMISSION v. ALPHA TELCOM, INC., AMERICAN TELECOMMUNICATIONS COMPANY, INC., STRATEGIC PARTNERSHIP ALLIANCE, LLC, SPA MARKETING, LLC, PAUL S. RUBERA, ROBERT A. MCDONALD, ROSS S. RAMBACH and MARK E. KENNISON (D.ORE.) (CV-01-1283 PA)
The United States Securities and Exchange Commission ("Commission") announced that, on March 1, 2002, the Honorable Owen M. Panner, United States District Judge for the District of Oregon, entered a final judgment imposing a permanent injunction and other relief against defendant Paul S. Rubera. On February 8, 2002, the Court also entered a final judgment by consent against defendant Alpha Telcom, Inc. ("Alpha") imposing a permanent injunction and other relief. This case involved the sale of approximately $135 million of investments in pay telephones where new investors' funds were secretly used to pay purported returns to existing investors.
The final judgment against Paul Rubera permanently enjoins him from violating the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 ("Securities Act") and orders that he pay disgorgement of $3,750,707.66 and prejudgment interest of $416,976.97. The Court granted judgment in favor of Rubera on the Commission's fraud claims under Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and declined to assess a civil penalty.
The final judgment against Alpha enjoins Alpha from violating Sections 5(a), 5(c) and 17(a) of the Securities Act, as well as Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The final judgment against Alpha also names Thomas F. Lennon, who had previously been named the Preliminary Receiver over Alpha, as the Permanent Receiver, orders Alpha to pay disgorgement pursuant to a plan of distribution to be approved by the Commission, the Court, and the Bankruptcy Court in the District of Oregon where Alpha's bankruptcy is being adjudicated and administered, and reserves the Commission's right to seek civil penalties against Alpha in the event the Permanent Receiver collects monies and assets exceeding the net amount owed to investors. On November 5, 2001, the Court entered final judgments against the other entity defendants, American Telecommunications Company, Inc. ("ATC"), Strategic Partnership Alliance, LLC ("SPA"), and SPA Marketing, LLC ("SPA Marketing"), granting the same relief and, in addition, enjoining SPA and SPA Marketing from violating the broker-dealer registration provisions of Section 15(a) of the Exchange Act. In each instance, the Receiver, on behalf of the entity defendant, consented to the entry of the judgment.
On November 2, 2001, the Court entered a default judgment against defendants Ross Rambach and Mark Kennison permanently enjoining them from violating Sections 5(a), 5(c) and 17(a) of the Securities Act, as well as Sections 10(b) and 15(a)(1) of the Exchange Act and Rule 10b-5 thereunder, and imposing other relief. The judgment orders Ross Rambach to pay disgorgement of $2,273,023.01, prejudgment interest of $159,423.80, and a civil penalty of $ 2,273,023.01. The judgment also orders Mark Kennison to pay disgorgement of $2,594,518.98, prejudgment interest of $178,606.07, and a civil penalty of $ 2,594,518.98.
On October 24, 2001, the Court entered a final judgment against defendant Robert A. McDonald pursuant to his consent. The final judgment permanently enjoins him from violating Sections 5(a), 5(c) and 17(a) of the Securities Act, as well as Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The judgment also orders Robert McDonald to pay $160,804.40 in disgorgement and $10,116.08 in prejudgment interest. No penalty was assessed based on McDonald's cooperation with the Commission.
The Commission's complaint alleged that since 1997, the defendants raised approximately $135 million from over 7,000 investors nationwide, purportedly for investments in pay telephones, promising investors a 14% annual return. Contrary to the defendants' representations, Alpha and ATC's payphone operations were losing money, and the defendants were making payments to existing investors with the money obtained from new investors. Defendants Ross Rambach, Mark Kennison, SPA and SPA Marketing also acted as unregistered brokers in connection with the offer and sale of the payphone investments.
The Commission would like to acknowledge the assistance of the State of Oregon Division of Finance and Corporate Securities in the investigation of this matter.