2003-04-25 sec-litreleases litigation_release 64 KB 2,078 chars

SEC v. Dale Carone; Allen R. Johnson; Joseph W. Isaac; LinkNet, Inc.; and LinkNet de America Latina, Ltd., No. LR-18108, Central District of California (Apr. 25, 2003) — Press Release

raw: Dale Carone, et al.

Dale Carone, et al., No. LR-18108 (Apr. 25, 2003)

Caption: SEC v. Dale Carone, et al.

summary

The SEC charged LinkNet, Inc. and LinkNet de America Latina with fraudulently selling $17 million in unregistered securities through a boiler room operated by Allen R. Johnson, Joseph W. Isaac, and Dale R. Carone, who concealed that 30% ($5.1M) went to commissions and made false claims about NASDAQ listing and revenue contracts, resulting in permanent injunctions against the companies while litigation continues against the three individuals.

paragraph

The SEC alleged that LinkNet, Inc. and LinkNet de America Latina, Ltd. fraudulently offered and sold approximately $17 million in unregistered securities between August 1999 and October 2000 via a boiler room in Encino, California, operated by Allen R. Johnson, Joseph W. Isaac, and Dale R. Carone. The defendants concealed that at least $5.1 million (30%) of investor funds were paid as commissions and made false representations about an imminent NASDAQ listing, a pending public offering, and lucrative long-distance service contracts. LinkNet and Latina settled without admitting or denying guilt, accepting permanent injunctions under Sections 5(a), 5(c), 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Exchange Act, while Johnson, Isaac, and Carone remain under active litigation for their personal sales of stock through the scheme.

narrative

Between August 1999 and October 2000, LinkNet, Inc. and LinkNet de America Latina, Ltd. fraudulently sold approximately $17 million in unregistered securities through a boiler room operation based in Encino, California, managed by Allen R. Johnson, Joseph W. Isaac, and Dale R. Carone. The defendants concealed that at least $5.1 million—30% of the total proceeds—was paid out as commissions to the boiler room staff, in violation of securities disclosure requirements. They also made materially false claims that LinkNet’s stock was about to be listed on NASDAQ, that a public offering was imminent, and that the companies had lucrative contracts for long-distance service sales in the U.S. and Mexico that would generate millions in revenue. LinkNet and Latina settled with the SEC without admitting or denying the allegations, agreeing to permanent injunctions prohibiting future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. Meanwhile, Johnson, Isaac, and Carone are still facing active litigation, as the SEC also alleges they personally sold their own shares of LinkNet and Latina stock through the same fraudulent boiler room and other channels during the offering period. The case highlights a classic boiler room scheme involving misrepresentation, undisclosed commissions, and insider self-dealing. The companies’ settlement resolved their liability, but the individuals remain accountable for their direct roles in the fraud.

Enriched metadata

Scheme: boiler-room (100%)
Court: Central District of California
Outcome: settled
Victim loss: $17,000,000
Entity: LinkNet, Inc.

Classified boiler-room(confidence 100%). EDGAR detection: forms Form D· recall 50% / precision 4%. detection rule →

Extracted insights

Dollar amounts 2

$17.00M $17 million $10M–$100M
$5.10M $5.1 million $1M–$10M

Entities 6

scheme_term $5.1 million to boiler room operations
company linknet, inc.
company linknet, inc. and linknet de america latina, ltd.
person nora manella
agency s.e.c.
agency Securities and Exchange Commission

Triples 11

S.E.C. filed action against Dale Carone, et al.
Nora Manella issued final judgments against LinkNet, Inc. and LinkNet de America Latina, Ltd.
LinkNet, Inc. violated Sections 5(a), 5(c) and 17(a) of Securities Act of 1933
LinkNet, Latina, Allen R. Johnson, Joseph W. Isaac, Dale R. Carone charged with fraudulent offer and sale of unregistered securities of LinkNet and Latina
defendants raised approximately $17 million from investors
defendants paid as commissions $5.1 million to boiler room operations
LinkNet and Latina made false representations about public offering of LinkNet stock being imminent
LinkNet and Latina had contracts for sale of long-distance service in United States and Mexico
Isaac, Carone, and Johnson sold their personal shares of LinkNet and Latina stock
SEC settled action with LinkNet and Latina
litigation pending against Johnson, Isaac, and Carone

View original SEC litigation releasesec.gov

Extracted body text (2,078c)

Litigation Release No. 18108 / April 25, 2003 S.E.C. v. Dale Carone, et al., Docket No. CV 03 374NM (FMOx) (USDC C.D. Cal.) On April 8, 2003, the Honorable Nora Manella, U.S. District Judge, Central District of California, issued final judgments of permanent injunction against LinkNet, Inc. (LinkNet) and LinkNet de America Latina, Ltd. (Latina). The two companies were enjoined from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Act of 1934 and Rule 10b-5 promulgated thereunder. LinkNet and Latina consented to the orders without admitting or denying the Commission's allegations. The Commission charged LinkNet, Latina, Allen R. Johnson, Joseph W. Isaac and Dale R. Carone with the fraudulent offer and sale of unregistered securities of LinkNet and Latina. The complaint alleges the defendants conducted these offerings from August 1999 through October 2000 and raised approximately $17 million from investors by selling the stock through a boiler room established by Johnson, Isaac and Carone in Encino, California. The complaint alleges that in making the offering the defendants failed to disclose the fact that at least $5.1 million, or thirty percent, of the offering proceeds were paid as commissions to the boiler room operations. It also alleges that the defendants made false representations that: (1) a public offering of LinkNet stock was imminent; (2) LinkNet's stock would shortly be listed on NASDAQ; (3) investors could realize phenomenal returns on their investment in a short time; and (4) LinkNet and Latina had contracts for the sale of long-distance service in the United States and Mexico that would generate millions of dollars in revenue to the companies. The complaint also alleges that, while the offerings were ongoing, Isaac, Carone, and Johnson also sold their personal shares of LinkNet and Latina stock through the Encino boiler room and by other means. Although LinkNet and Latina have settled the Commission's action, litigation is still pending against Johnson, Isaac, and Carone.

OCR text (2,078c · plain-text · 99% conf)