Continental Wireless Cable Television Barred From Kansas : Regulations: Company with offices in Irvine and San Diego is accused with two other companies of selling unregistered securities.
Continental Wireless Cable Television Inc., which has offices in San Diego and Irvine, has been ordered along with two other “wireless cable” companies to stop doing business in Kansas.
Alleging that Continental was selling unregistered securities, Kansas Securities Commissioner James Parrish this week ordered the company, which used country music star Roy Clark in its commercial videos to promote a wireless cable system in Nashville, Tenn., to cease operations in the state.
Parrish accused all three firms of fraud. The concept of wireless cable is legitimate, he said, but “many swindlers are persuading investors to pay inflated prices by promising unrealistic returns.”
Townes Osborn, a spokeswoman for Continental, said the company has a wireless system up and running in Nashville. She said she had not seen the order.
“We do not feel the findings of fact have any substance,” she said.
Also named in the order are United Communications Ltd. of Henderson, Nev., and Spectrum Resources Group Inc. of Washington. The companies are unrelated, Parrish said. Together, they were trying to raise $28 million from investors. Officials at Spectrum and United Communications did not return calls for comment.
Wireless cable networks have emerged as a competitor to cable television. They use microwave radio systems to broadcast as many as 33 pay-TV channels into homes by rooftop antennas without installing cables.
Promoters of the industry argued that its lower operating costs--about $400 for each subscriber, compared to $1,500 for regular cable--mean that operators can undersell high-priced cable TV. Legitimate operators broadcast programming to hundreds of thousands of households.
But regulators became concerned last year that the door was open for fraud by con artists who exaggerated profit potential and minimized risks.
“There is no disclosure to the investor of the actual cost of acquiring the license or its fair market value,” Parrish said in a statement. “Promotional materials supplied to investors greatly exaggerate the potential return to investors.”
In February, Jay Bishop, national marketing director of San Diego-based Continental, and Gene Cardenez, the company’s chief financial officer, received cease-and-desist orders from the Kansas securities commissioner, who alleged that they were selling unregistered securities. At the time, both worked for American Wireless Systems Inc., which appealed the order.
In March, Continental Wireless Cable Television Inc. in San Diego and its president, Robin J. McPherson, 38, were ordered to stop doing business in Missouri. Regulators there alleged that they were selling unregistered securities.
Cardenez, Bishop and McPherson were all named in the Kansas order on Thursday.
Jeffrey D. Howes, president of Phoenix-based American Wireless Systems Inc., said his company sold its brokerage force and lease on a headquarters office in Irvine to Continental last fall.
American Wireless Systems, which built a wireless cable operation in Ft. Worth, no longer needed the brokers because it was going public and moving to Arizona, Howes said.
American Wireless had also drawn scrutiny from federal investigators for its marketing practices and was banned from selling unlicensed securities in a number of states. By taking the company public last fall, Howes resolved regulatory questions as to whether the securities should be registered.
Continental has a wireless system in Nashville with about 1,000 subscribers, Osborn said. Howes said Continental moved its headquarters to San Diego and closed its office in Orange County. But the company brochures list financing offices in Los Angeles, Irvine, Encino, La Jolla and Orlando, Fla.
Continental’s marketing style, including the use of infomercials, closely mirrors that of American Wireless Systems. In fact, its logo is the reverse image of American Wireless Systems’.