The Securities and Exchange Commission said Thursday that it has charged two executives of American Telephone & Telecommunications Corp. with fraud for selling securities in the firm that purportedly was set up to offer long-distance telephone service via the Internet.
The company is not related to telecommunications giant AT&T; Corp.
The SEC accused Fred Carter, ATTC’s president and chief executive, and Wendell Carter, the company’s vice president of corporate sales, of attracting investments by falsely claiming between October 1996 and October 1997 that they had designed a technology for routing phone calls using the Internet.
The two men, who are not related, also told potential investors that the Washington-based company’s stock price would at least triple within a year and falsely claimed that ATTC had a strategic alliance with a maker of Internet telephony products, the securities regulator said.
SEC attorney Matthew Moro said the total amount taken in the securities fraud was more than $600,000 and involved about 70 investors.
Investors bought stock in ATTC for $1 and $5 a share and entered into so-called joint ventures with both Carters, according to the complaint filed in U.S. District Court. The civil lawsuit, which the SEC did not make public until Thursday, was filed Oct. 27.
“ATTC did not design any technology, but merely purchased Internet telephony products for use in investor demonstrations” and there was “no reasonable basis for ATTC’s financial projections” or strategic alliance, the SEC said.
Instead, the two allegedly spent the money for personal purposes, according to the SEC complaint.
Attempts to contact the defendants were unsuccessful.
Fred Carter, according to the securities regulator, was convicted of securities fraud in 1989 for making “similar misrepresentations about a computer technology company he owned.” There has been an outstanding warrant for his arrest since 1991 in connection with that conviction, the SEC noted in a statement.
In this current case, the SEC said Fred Carter failed to appear for testimony and that he did not produce any documents subpoenaed by the SEC. His last known address was in Maryland, the regulatory agency said.
Wendell Carter, also of Maryland, invoked his 5th Amendment right not to incriminate himself in testimony to the SEC in the pending case, the SEC’s lawsuit said.
The SEC is seeking to retrieve investors’ money with prejudgment interest and civil penalties, in addition to a permanent injunction enjoining both Carters from future violations.