U.S. Securities and Exchange Commission
Litigation Release No. 18792 / July 26, 2004
SEC v. Carone, et al. Docket No. CV03-374 NM (FMOx)(USDC, C.D. Cal.)
On July 19, 2004 the Honorable Nora M. Manella, U.S. District Court, Central District of California granted the Securities and Exchange Commission's Motion for Default Judgment Against Joseph M. Isaac enjoining him from future violations of the antifraud, securities registration and broker-dealer registration provisions of the federal securities laws.
On January 16, 2003, the Commission filed a complaint charging LinkNet, Inc., LinkNet de America Latina, Ltd., Allen R. Johnson, Joseph W. Isaac and Dale R. Carone with the fraudulent offer and sale of unregistered securities of LinkNet and Latina. The complaint alleged that the defendants conducted these offerings from August 1999 through October 2000 and raised approximately $17 million from investors by selling the stock through a boiler room established by Johnson, Isaac and Carone in Encino, California.
The complaint alleged that in making the offering the defendants failed to disclose the fact that at least $5.1 million, or thirty percent, of the offering proceeds were paid as commissions to the boiler room operations. The complaint also alleged that the defendants made false representations that: (1) a public offering of LinkNet stock was imminent; LinkNet's stock would shortly be listed on NASDAQ; investors could realize phenomenal returns on their investment in a short time; and LinkNet and Latina had contracts for the sale of long distance service in the United States and Mexico which would generate millions of dollars in revenue to the companies. The complaint further alleged that, while the offerings were ongoing, Isaac sold personal shares of LinkNet and Latina stock through the Encino boiler room and by other means.
The order against Issac prohibits him from future violations of Sections 5 and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. In addition, the Order bars Isaac from participating in any offering of penny stock. The order also provides for disgorgement in the amount of $1,819,201.94 along with prejudgment interest of $498,393.77, and a civil penalty in the amount of $110,000.00.