Web Firm Bilked Backers, SEC Says
Children’s Internet Inc., a company that promises to protect children from inappropriate Internet content, bilked more than $5 million from investors and used the money to pay gambling debts, according to a lawsuit filed Wednesday by the Securities and Exchange Commission.
The SEC sued the Pleasanton, Calif., company’s 39-year-old chief executive, Sholeh Hamedani, and her father, Nasser Hamedani, 68, both of Danville, Calif.
The Hamedanis treated the company “like their own piggy bank and then tried to cover up the scheme,” said Helane Morrison, head of the SEC’s San Francisco office.
“They’re living the good life off of investors,” said Michael Dicke, an assistant district administrator for the SEC.
The SEC’s suit claims the Hamedanis used investors’ money for such things as buying a new Corvette sports car and a Mercedes sedan and paying $300,000 of gambling debts.
Company revenue was less impressive, totaling less than $300, according to the firm’s latest financial statement filed with the SEC.
The Hamedanis’ lawyer wasn’t immediately available for comment.
Investors who bought shares in the company between 2002 and 2004 were falsely told the stock would be listed soon on a national market and could be freely traded, even though trading didn’t begin until early in 2005, regulators said.
The SEC says the Hamedanis also failed to tell investors that as much as 25% of the money the company received was paid to two Florida stock promoters, with other funds being secretly funneled back to the Hamedanis and their privately held company, Two Dog Net Inc.
Sholeh Hamedani faces other charges, including lying to accountants, making false SEC filings and issuing a mid-2005 restatement of previous financial reports which the SEC claims was done to hide the alleged scheme.
Stock promoters Peter Perez, 40, of Boca Raton, Fla., and Cort Poyner, 37, of Delray Beach, Fla., were charged with helping to sell millions of shares of unregistered Children’s Internet stock, making false statements and omitting material facts to induce investors to buy stock.
Perez’s lawyer had no immediate comment and Poyner’s lawyer, Gary Klein, declined to comment.
The SEC’s lawsuit seeks the return of all investor funds, with interest and penalties, along with orders barring the Hamedanis from serving as corporate officers or directors, and banning them and the stock promoters from any involvement in future penny-stock offerings.
