U.S. Securities and Exchange Commission
Litigation Release No. 18895 / September 23, 2004
SEC v. Robert Snyder, AlphaCom, Inc., James Stamp, and Gary Kendron, Civil Action No. 1:03CV1349 (U.S.D.C. N.D. Ohio, filed July 10, 2003)
SEC SETTLES CIVIL FRAUD CHARGES AGAINST ALPHACOM, INC., ROBERT SNYDER, JAMES STAMP AND DISGORGEMENT CLAIM AGAINST RELIEF DEFENDANT GARY KENDRON
The Securities and Exchange Commission (Commission) announced that it has settled civil fraud charges against AlphaCom, Inc., Robert Snyder, AlphaCom's President, and James Stamp, an accountant, for their fraudulent sales of AlphaCom securities, and against Relief Defendant Gary Kendron. On September 15, 2004, a federal court in Cleveland, Ohio entered Final Judgments enjoining AlphaCom, Snyder and Stamp from violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (Securities Act), Sections 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder; enjoining Snyder and Stamp from violations of Sections 15(a) and 15(c) of the Exchange Act; enjoining Snyder and AlphaCom from violations of Section 15(d) of the Exchange Act and Rules 15d-1 and 15d-13 thereunder; ordering disgorgement against AlphaCom and Snyder, in the amounts of $8.24 million and $662,000, respectively, with pre-judgment interest, payment of which was waived, and no civil penalty imposed on AlphaCom, Snyder or Stamp, based upon their demonstrated inability to pay; and enjoining Snyder from acting as an officer or director of a public company. Relief Defendant Gary Kendron was also ordered to pay disgorgement and prejudgment interest totaling $225,000. The defendants consented to the entry of Final Judgments without admitting or denying the allegations of the Complaint.
The Complaint, which was filed on July 10, 2003, alleged that, from September 1997 through October 2000, the defendants raised $8.9 million from the sale of AlphaCom securities to over 1000 investors. The Complaint alleged that the defendants raised these funds by falsely representing that AlphaCom owned exclusive rights to novel Internet technologies, Network Utilities (NU) and Very Minimal Shift Keying (VMSK), that were supposed to increase Internet downloading speeds and the speed of access to the Internet. The Complaint alleged that, contrary to the representations, AlphaCom did not own the technologies. The Complaint further alleged that AlphaCom had merely entered into contingent agreements to acquire the technologies, but failed to fulfill the agreements because it did not pay a total of $4 million required under the agreements. The Complaint also alleged that Snyder falsely represented that AlphaCom owned the exclusive rights to sell the Insat Wireless Modem, a modem that provides wireless access to the Internet, when, in reality, he had failed to acquire those rights.
In addition, the Complaint alleged that Snyder and AlphaCom misrepresented that investors' funds would be used for AlphaCom's business. The Complaint alleged that Snyder misused $451,000 of the AlphaCom offering proceeds to buy a home and $500,000 to make a loan to Kendron, who did not repay the loan. The Complaint further alleged that Kendron does not have a legitimate claim to the funds.
The Complaint alleged that the defendants offered and sold AlphaCom securities in transactions that were not registered with the Commission. In addition, the Complaint alleged that Snyder and Stamp acted as broker-dealers without registering with the Commission.
The Complaint also alleged that AlphaCom, aided and abetted by Snyder, filed a Form 10-K for 2000 without audited financial statements and failed to file required periodic reports with the Commission since April 2001.