Hawaii Probing 2 O.C. Firms’ Securities Sales : Investigations: Marketing of unlicensed equities is alleged. Questionable telemarketing by other companies sparks cease-and-desist orders.
Hawaiian securities regulators are investigating two companies in Orange County for allegedly selling unlicensed securities, a state official there said Tuesday.
In addition, regulators in some states have ordered several other Orange County companies to stop doing business because of questionable marketing practices.
American Telecom Group Inc. in Irvine and RTA Inc. in Costa Mesa are under investigation in connection with the companies’ efforts to assist individuals applying for so-called wireless cable-TV licenses from the Federal Communications Commission, said Neal Aoki, a lawyer with the securities enforcement unit of the Hawaii Department of Commerce and Consumer Affairs.
Michael Todd, director of marketing for American Telecom Group, said his company was not violating any laws but has ceased operations in both Massachusetts and Hawaii because “there is a lot of heat” from regulators. RTA officials could not be reached for comment.
Such companies help people to seek wireless cable licenses from the FCC, Aoki said.
Investors in such businesses often are not told of potential risks for investors, according to the Federal Trade Commission. Investors could lose as much as $25 million this year, the FTC said, because of fraudulent telemarketing of such services.
Robert Schmidt, president of the Wireless Cable Assn., said of the application services, “Orange County seems to have more than its share of these companies. They are giving our industry a bad name.” The organization, based in Washington, is a trade group for operators of wireless cable-TV systems.
State securities regulators in California would not comment on investigations against specific companies.
“We are investigating the whole industry in the state,” said William McDonald, spokesman for the state Department of Corporations. “We have not taken any actions yet.”
So-called application preparation services charge fees ranging from $5,000 to $7,000 to investors who are willing to speculate that the licenses, which the FCC awards by lottery, will appreciate rapidly in value. The licenses are required for companies to set up wireless cable-TV networks.
Wireless cable networks have emerged as a competitor to cable TV. Wireless networks use microwave radio systems to broadcast as many as 33 pay-TV channels into homes without installing cables and hardware. But industry watchers say the competition has attracted its share of con artists.
The FCC effectively shut down the application preparation services industry on April 9, when it declared that many such companies were ripping off consumers by charging exorbitant fees to process applications for licenses that were awarded to only a few applicants. The agency said it was temporarily freezing all awards of the wireless licenses.
The order has affected American Telecom’s business, Todd said. He acknowledged the presence of scam operations in the industry, but he maintained that his company thinks that the licenses represented valid investment opportunities.
“We are not doing application services anymore,” Todd said. “We know there is a lot of heat on the industry. We don’t fall in that category. We are hoping that the FCC reopens the application awards.”
Todd said his company has offered refunds to customers who became jittery after the FCC order was issued.
RTA’s owners are listed as Neal Reifsnyder, Nathan Torosian and Larry Arnold, Aoki said. Torosian and Arnold are also listed as technical consultants to American Telecom Group. Todd would not disclose the identities of American Telecom’s owners.
In January, the FTC issued a temporary restraining order against MMDS Technologies in Irvine, which also did business as Metro Communications Group, according to the state Department of Corporations. The federal agency also issued an order freezing the company’s assets, the state said. MMDS officials could not be reached for comment.
The state of Washington has issued a cease-and-desist order against GMT Group and National Micro Vision Systems, two Irvine companies run by L. Richard Tamplin and Fred G. Carl. Illinois has issued an order of prohibition against the companies. GMT Group officials could not be reached for comment.
Aoki said the investigations of American Telecom and RTA are in addition to a cease-and-desist order issued against American Wireless Systems Inc. in Irvine by the state of Hawaii.
American Wireless officials acknowledged on Friday that cease-and-desist orders had been issued against it in Hawaii and South Dakota and that it is under investigation in Illinois, Michigan and Kansas.
A spokeswoman for the California Department of Corporations would not say if any investigations of American Wireless, American Telecom Group or RTA Inc are underway.
Jeffrey Howes, president of American Wireless, denied any wrongdoing and said Tuesday that the company plans to launch its first wireless cable network in Ft. Worth, Tex., in June.
