SEC v. Web Hosting Headquarters Partnership; Donald E. Rhoades; Kenneth R. Grossfeld; Wayne L. Prichason; Eduardo Villar; Karyn Miller, et al., No. LR-16846, Southern District of Florida (Dec. 29, 2000) — Press Release

SECURITIES AND EXCHANGE COMMISSION Litigation Release No.16846 / December 29, 2000 SEC HALTS ALLEGED FRAUDULENT SECURITIES OFFERING BY MIAMI, FLORIDA BOILER-ROOM SECURITIES AND EXCHANGE COMMISSION V. WEB HOSTING HEADQUARTERS PARTNERSHIP, DONALD E. RHOADES, KENNETH R. GROSSFELD, WAYNE L. PRICHASON, EDUARDO VILLAR, AND KARYN MILLER, ET AL., Case No. 00-4975-CIV-HIGHSMITH-GARBER (S.D. Fla., filed Dec. 28, 2000) The Securities and Exchange Commission (SEC) announced that on December 28, 2000, it obtained emergency relief halting an alleged ongoing fraudulent securities offering being conducted by a Miami, Florida boiler-room and its principals and telemarketers. Among other things, the SEC's complaint alleges that the boiler-room, Web Hosting Headquarters Partnership (Web Hosting or the Company), failed to disclose to investors that it is controlled by individuals with a prior history of defrauding investors, and that it has diverted, and would continue to divert, 62% of funds raised from investors to pay its principals and telemarketers. The complaint further alleges that Web Hosting and the named individual defendants had already raised at least $2.5 million from defrauded investors, and that its fraudulent sales were ongoing. All of the named individual defendants reside in South Florida. At the SEC's request, the Honorable Shelby Highsmith of the United States District Court of the Southern District of Florida entered an order temporarily restraining Web Hosting, Donald E. Rhoades, Kenneth R. Grossfeld, Wayne L. Prichason, Eduardo Villar, and Karyn Miller from continuing to violate the federal securities laws by fraudulently selling Web Hosting securities in unregistered transactions and by acting as broker-dealers while not registered with the Commission. The Court also entered orders freezing the defendants' assets, appointing a Receiver over Web Hosting, and granting other emergency relief. According to the SEC's complaint, filed on December 28, 2000, Web Hosting has already raised funds from at least 132 investors nationwide. Among other things, the SEC's complaint alleges that the defendants: falsely tell investors that Web Hosting is an "established, rapidly growing company" that hosts websites on the Internet, and that the funds invested will be used to expand Web Hosting's operations. Investors are told that Eduardo Villar and Karyn Miller are the Company's "co-founders" and "initial managing partners." According to the SEC's complaint, however, Web Hosting is actually a boiler-room operation with only minimal legitimate business activities - its primary activity has been to raise investor funds for the benefit of its principals and telemarketers, and approximately 92% of its funds came from sales of securities to investors rather than from business revenue from web site customers; fail to disclose to investors that Web Hosting is controlled by Miller's father, Donald E. Rhoades, and his partner, Kenneth R. Grossfeld, both recidivist securities and commodities laws violators with extensive disciplinary histories; misleadingly describe how Web Hosting will use investor funds and fail to disclose to investors that approximately 62% of the funds raised from investors have been and will continue to be pocketed by Web Hosting's principals and telemarketers in the form of commissions, costs, and fees, with the largest share going to Rhoades and Grossfeld; significantly exaggerate the number of Web Hosting's customers and falsely tell investors that they can expect to earn exorbitant returns on their investment.The SEC's complaint also alleges that Web Hosting and its telemarketers use hard-sell tactics and misrepresent the number of securities available for purchase in order to convince prospective investors to purchase Web Hosting securities. The SEC's complaint also names Web Hosting Headquarters, Inc., National Millennium Corporation, Internet Management Group, Inc., Intranet Inc., and Lenica Corp., as relief defendants. At the SEC's request, the Court temporarily froze the assets of all of the defendants and relief defendants. The SEC's complaint seeks disgorgement from the defendants and relief defendants, all of which directly or indirectly received investor funds, so that funds may be returned to the defrauded investors. Upon the SEC's motion, the Court appointed Christian R. Bartholomew, a partner in the Miami Office of the Morgan, Lewis & Bockius law firm, as Receiver over Web Hosting. Among other things, Mr. Bartholomew is responsible for taking control of Web Hosting and for marshaling and safeguarding its assets. In addition to freezing the assets of the defendants and the relief defendants, and granting other relief, the temporary restraining order restrains the defendants from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 [15 U.S.C. §§ 77e(a), 77e(c) and 77q] and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 [15 U.S.C. §§ 78j(b) and 78o(a)(1)] and Rule 10b-5 thereunder [17 C.F.R. 240.10b-5]. Those sections and rules prohibit certain sales of securities not registered with the Commission, prohibit fraud in the offer and sale, and in connection with the purchase and sale, of securities, and prohibit acting as a broker or dealer while not registered with the Commission.

SECURITIES AND EXCHANGE COMMISSION Litigation Release No.16846 / December 29, 2000 SEC HALTS ALLEGED FRAUDULENT SECURITIES OFFERING BY MIAMI, FLORIDA BOILER-ROOM SECURITIES AND EXCHANGE COMMISSION V. WEB HOSTING HEADQUARTERS PARTNERSHIP, DONALD E. RHOADES, KENNETH R. GROSSFELD, WAYNE L. PRICHASON, EDUARDO VILLAR, AND KARYN MILLER, ET AL., Case No. 00-4975-CIV-HIGHSMITH-GARBER (S.D. Fla., filed Dec. 28, 2000) The Securities and Exchange Commission (SEC) announced that on December 28, 2000, it obtained emergency relief halting an alleged ongoing fraudulent securities offering being conducted by a Miami, Florida boiler-room and its principals and telemarketers. Among other things, the SEC's complaint alleges that the boiler-room, Web Hosting Headquarters Partnership (Web Hosting or the Company), failed to disclose to investors that it is controlled by individuals with a prior history of defrauding investors, and that it has diverted, and would continue to divert, 62% of funds raised from investors to pay its principals and telemarketers. The complaint further alleges that Web Hosting and the named individual defendants had already raised at least $2.5 million from defrauded investors, and that its fraudulent sales were ongoing. All of the named individual defendants reside in South Florida. At the SEC's request, the Honorable Shelby Highsmith of the United States District Court of the Southern District of Florida entered an order temporarily restraining Web Hosting, Donald E. Rhoades, Kenneth R. Grossfeld, Wayne L. Prichason, Eduardo Villar, and Karyn Miller from continuing to violate the federal securities laws by fraudulently selling Web Hosting securities in unregistered transactions and by acting as broker-dealers while not registered with the Commission. The Court also entered orders freezing the defendants' assets, appointing a Receiver over Web Hosting, and granting other emergency relief. According to the SEC's complaint, filed on December 28, 2000, Web Hosting has already raised funds from at least 132 investors nationwide. Among other things, the SEC's complaint alleges that the defendants: falsely tell investors that Web Hosting is an "established, rapidly growing company" that hosts websites on the Internet, and that the funds invested will be used to expand Web Hosting's operations. Investors are told that Eduardo Villar and Karyn Miller are the Company's "co-founders" and "initial managing partners." According to the SEC's complaint, however, Web Hosting is actually a boiler-room operation with only minimal legitimate business activities - its primary activity has been to raise investor funds for the benefit of its principals and telemarketers, and approximately 92% of its funds came from sales of securities to investors rather than from business revenue from web site customers; fail to disclose to investors that Web Hosting is controlled by Miller's father, Donald E. Rhoades, and his partner, Kenneth R. Grossfeld, both recidivist securities and commodities laws violators with extensive disciplinary histories; misleadingly describe how Web Hosting will use investor funds and fail to disclose to investors that approximately 62% of the funds raised from investors have been and will continue to be pocketed by Web Hosting's principals and telemarketers in the form of commissions, costs, and fees, with the largest share going to Rhoades and Grossfeld; significantly exaggerate the number of Web Hosting's customers and falsely tell investors that they can expect to earn exorbitant returns on their investment.The SEC's complaint also alleges that Web Hosting and its telemarketers use hard-sell tactics and misrepresent the number of securities available for purchase in order to convince prospective investors to purchase Web Hosting securities. The SEC's complaint also names Web Hosting Headquarters, Inc., National Millennium Corporation, Internet Management Group, Inc., Intranet Inc., and Lenica Corp., as relief defendants. At the SEC's request, the Court temporarily froze the assets of all of the defendants and relief defendants. The SEC's complaint seeks disgorgement from the defendants and relief defendants, all of which directly or indirectly received investor funds, so that funds may be returned to the defrauded investors. Upon the SEC's motion, the Court appointed Christian R. Bartholomew, a partner in the Miami Office of the Morgan, Lewis & Bockius law firm, as Receiver over Web Hosting. Among other things, Mr. Bartholomew is responsible for taking control of Web Hosting and for marshaling and safeguarding its assets. In addition to freezing the assets of the defendants and the relief defendants, and granting other relief, the temporary restraining order restrains the defendants from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 [15 U.S.C. §§ 77e(a), 77e(c) and 77q] and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 [15 U.S.C. §§ 78j(b) and 78o(a)(1)] and Rule 10b-5 thereunder [17 C.F.R. 240.10b-5]. Those sections and rules prohibit certain sales of securities not registered with the Commission, prohibit fraud in the offer and sale, and in connection with the purchase and sale, of securities, and prohibit acting as a broker or dealer while not registered with the Commission.