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What about Rob B. Is he an employee or "consultant"? I am not sure if Kostro counts as one of the seven employees in his COB/Director title.
I seem to remember one of the marketing people was Jairo Rivera.
I know this company has been mentioned before, but I am not sure if their website has ever been posted:
http://www.stratxx.com
FYI - regarding SEC vs. Joe and Luis. This is going to be going on a long time, folks. Also, it looks like the commission might be adding others to the list as well. Could this be related to the GTEM Well's Notice?
Cut and pasted from the PDF docs. Bolding added for emphasis.
1. Case Management Track. Counsel considered the complexity of the case, number of parties, number of expert witnesses, volume of evidence, problems locating or preserving evidence, time estimated for discovery, and time reasonably required for trial. Counsel for the parties discussed these matters but could not agree on the track assignment. Counsel for the Commission believes that Standard Track scheduling would be sufficient, but attorneys for Defendants recommend that the Court assign this case to the Complex
Case 0:07-cv-61693-JAL Document 39-1 Entered on FLSD Docket 02/25/2008 Page 1 of 8
Case No. 0:07-cv-61693-JAL 2
Track. In support of their position, Defendants state that the parties agree that the trial will take 15-20 days; the 126-paragraph Complaint alleges six claims against both defendants; the Commission has obtained at least 100,000 pages of documents through its investigation and deposed approximately 15 witnesses during its investigation; many of the original versions of relevant documents are in the custody of a third party, GlobeTel Communications Corp., which may or may not have undertaken to preserve the original documents in a readily accessible form; the Commission has indicated it needs to take as many as 15-20 depositions, and, depending on who is deposed, Defendants will require additional depositions; and, in the near future, the Commission’s Staff may recommend that the Commission bring a related action against other defendants, thus creating the potential for simultaneous discovery that could present scheduling problems.
2. Proposed trial date & length of trial. Assuming this case is assigned to the Complex Track, the parties propose that the trial be set to commence on August 10, 2009, or as soon thereafter as can be accommodated by the Court. The parties estimate the trial will require 15 to 20 days.
3. Likelihood of Settlement. Settlement appears unlikely at this time.
4. Likelihood of Appearance of Additional Parties. Appearance of additional parties in this case appears unlikely. It should be noted, however, that the in the near future, the Commission’s Staff may recommend that the Commission file a related action against other defendants.
5. Proposed Schedule: The parties agree that discovery other than initial disclosures should not be commenced until April 14, 2008, because of the pending motions to dismiss. Case 0:07-cv-61693-JAL Document 39-1 Entered on FLSD Docket 02/25/2008 Page 2 of 8
Case No. 0:07-cv-61693-JAL 3
(D.E. 21 & 24). The motions to dismiss were fully briefed as of February 7, 2008. (D.E. 36 & 37).
a. Initial disclosures shall be made by Tuesday, February 26, 2008. The parties have agreed that they need not re-produce documents previously produced during the Commission’s investigation provided that those previously produced documents can be readily identified by the parties.
b. Deadline to join other parties and to amend the pleadings: April 14, 2008, or as directed by the Court.
c. To complete discovery:
i. Fact discovery cut-off: January 20, 2009.
ii. Expert discovery cut-off
1. Plaintiff’s Rule 26(a)(2) expert disclosures: February 20, 2009.
2. Defendants Rule 26(a)(2) expert disclosures and rebuttal expert witness disclosures: March 13, 2009.
3. Rule 26(a)(2) rebuttal expert witness disclosures for Plaintiff: March 27, 2009.
d. Summary judgment motions and other pretrial motions. The parties agree that it appears that one summary judgment motion per party should be sufficient. Summary judgment motions shall be served by May 4, 2009.
e. Pretrial motions other than summary judgment shall be filed by July 20, 2009. Case 0:07-cv-61693-JAL Document 39-1 Entered on FLSD Docket 02/25/2008 Page 3 of 8
Case No. 0:07-cv-61693-JAL 4
f. Rule 26(a)(3) pretrial disclosures: July 7, 2009.
g. Parties Local Rule 16.1.D. meeting: July 13, 2009.
h. Pretrial stipulation: Parties shall file with the Court: July 20, 2009.
i. Final Pretrial conference: August 3, 2009.
Look like Joe will not get his chance to speak to the courts. Sounds like the courts might be coming to some sort of conclusion - IMHO.
02/13/2008 37 MOTION for Hearing re 24 MOTION to Dismiss 1 Complaint by Joseph J Monterosso. (Hunter, Mark) (Entered: 02/13/2008)
02/14/2008 38 ORDER denying 37 Motion for Hearing without prejudice. In accordance with L.R. 7.1(B), if the Court deems a hearing appropriate in evaluating a matter, the Court will schedule a hearing and notify the Parties. This entry constitutes the ENDORSED ORDER in its entirety. Signed by Judge Joan A. Lenard on 2/14/08. (lc1) (Entered: 02/14/2008)
It looks like Joe would like to help clarify his stance:
DEFENDANT JOSEPH J. MONTEROSSO’S MOTION FOR HEARING
Pursuant to Southern District of Florida Local Rule 7.1(B), Defendant Joseph J.
Monterosso (“Mr. Monterosso”), by and through his undersigned counsel, hereby submits this
Motion for Hearing to accompany his Motion to Dismiss, dated January 11, 2008. In support
thereof, Mr. Monterosso respectfully states as follows:
1. Mr. Monterosso desires the hearing because the issues presented in the Motion for
Dismiss are sufficiently complex that oral argument will enable the Court to benefit from both
(1) a more straight-forward presentation of arguments, and (2) the ability to question both parties
about their positions regarding the same.
2. Mr. Monterosso estimates that each party’s oral argument will take between thirty
(30) minutes and one (1) hour, depending upon the level of clarifying questions from the Court.
Case 0:07-cv-61693-JAL Document 37 Entered on FLSD Docket 02/13/2008 Page 1 of 3
WHEREFORE, Mr. Monterosso respectfully requests that the Court grant his request for
a hearing relating to his Motion to Dismiss, and such other relief as the Court deems just and
proper.
Dated: February 13, 2008
Miami Beach, Florida
Thanks Rhap. So does that mean it was a sell under the ask or a buy above the bid - or is it inconclusive?
Question...was that 100K at .11 at the ask or did that go through when then bid was .105 and the ask was .12 ?
Nil, it was msg 80809:
http://investorshub.advfn.com/boards/read_msg.asp?message_id=21231221
It looks like O'Fallon Wireless (www.ofallonwireless.com) is using the Trimax products since a picture is posted on the site which is identical to one posted on the Trimax site.
Thanks, coasti.
If it was Hotzone related shipments south of the border, I wonder when it occurred? I remember Joe' emails about shipping radios, but I thought those were supposed to be shipped by Uli? I also remember Joe going on about his role in financing the radios too.
Not that it means much, but did anyone archive those webpages?
can anyone access sansire.com? EOM
The Stevens class action case has officially ended.
02/04/2008 84 FINAL JUDGMENT ORDER.Signed by Judge Cecilia M. Altonaga on February 4, 2008. (Attachments: # 1 Attachment 1)(ps1) (Entered: 02/04/2008)
02/04/2008 85 FINAL ORDER APPROVING USE OF POLICY PROCEEDS, granting 75 Agreed Intervention Motion.Signed by Judge Cecilia M. Altonaga on February 4, 2008.(ps1) (Entered: 02/04/2008)
02/04/2008 86 Minute Entry for proceedings held before Judge Cecilia M. Altonaga: Settlement Hearing held on 2/4/2008. Order entered. Court Reporter: Barbara Medina - phone number 305-523-5518 (ps1) (Entered: 02/04/2008)
To pass the time, there was some recent info posted on PACER about the Class settlement. Basically, there was concern that the only money available for settlement was going to come from the $5M insurace policy. So if the lawyer's and plaintiffs wanted to come away with something, they should settle and get something now rather than risk getting nothing at a later date.
Some other points are:
1) Out of the 2.3M, the Plaintiff's attorneys are asking for $690,000.
2) There are 16,000 potential class members who were mailed the notice of claim, and the 5 plaintiffs could each get an additional $2000 each.
So without taking share allocation into account, if all 16,000 people filed for a claim, that amounts to about $100 per person. I'll probably fill out the forms just to see if I can get some pizza money.
History of the Settlement Negotiations
30. The parties agreed to hold the mediation in New York on August 23, 2007, and
agreed to invite counsel for the plaintiffs in the related shareholder derivative action so as to be able
to achieve a global settlement. The parties further agreed to submit pre-mediation statements to the
mediator.
31. To assist us in the preparation of our pre-mediation statement and to evaluate the
Case 1:06-cv-21071-CMA Document 83 Entered on FLSD Docket 01/28/2008 Page 6 of 91
-7-
potential damages involved, we retained Candace Preston, a Chartered Financial Analyst and wellregarded
economic analysis expert, to conduct a preliminary damage study. Ms. Preston compared
the stock price of GlobeTel during the Class Period and the alleged false statements to determine
each false statement’s relative impact on the Company’s stock price. Ms. Preston arrived at an
estimated damages number of $53 million (the Settlement thus represents almost 4.5% of this
maximum damages number). We used Ms. Preston’s analysis in preparing our pre-mediation
statement. As with the Complaint and our opposition to the motions to dismiss, Co-Lead Counsel
discussed the substance of our pre-mediation brief and delegated the responsibility of preparing the
first draft to SSB&R.
32. On August 23, 2007, the mediation took place and we were informed that over $1
million had already been spent on attorneys in connection with the SEC’s investigation of GlobeTel
and its directors and officers. In addition, counsel for the insurer indicated that the SEC’s
investigation would cost even more money in the future and that it would have to set aside hundreds
of thousands of dollars to ensure that those legal costs would be covered.
33. As a result of the past and future costs associated with the SEC’s investigation, we
determined that there was considerably less money available for the Class than previously
understood. In addition, GlobeTel’s stock trades in the pennies and it continues to have significant
cash flow problems. We also received written confirmation that Huff--the sole remaining individual
defendant--did not possess the financial ability to pay a meaningful judgment if one were to be
obtained against him. As a result, we determined that if any monetary recovery was to be obtained
to benefit the Class, it would have to be done quickly and well-within policy limits.
34. At that point, over $1 million had already been spent on various defense costs.
Case 1:06-cv-21071-CMA Document 83 Entered on FLSD Docket 01/28/2008 Page 7 of 91
-8-
GlobeTel and its directors and officers further estimated that they would require nearly $1 million
more in insurance proceeds to defend themselves in connection with the SEC’s investigation as well
as pay defense costs associated with the settlement of this and the derivative claims. That would
leave less than $3 million to settle these claims as well as those asserted by the derivative plaintiffs.
35. With the aid of the mediator, we were able to secure the vast majority of the
remaining $3 million, representing an excellent recovery given the very real possibility of no
recovery at all.
Mr Allan, accumulation along with this comment:
Management has tight lips this time, until proper.
They don't want another Internafta on their hands and probably will not say anything until there is money in the bank. At least that is what I think you are referring to.
If this comes to pass, I want to thank you in advance for your insight.
On the hapschile.cl website, there is a link to "alianzas". Sanswire and Globetel are listed along with this company.
http://www.oa.com/?page=54&lan=2
Serious1, nice find indeed! EOM
Sirius, I remember that being mentioned as well. While it is nice to see a glimpse into the thoughts of the SEC - namely that Joe's and Luis' actions had a direct bearing on GTEM's violations - until the court makes a final ruling, it is still plaintiff vs. defendant.
The court would probably need to come out with a final ruling on Joe and Luis which would set a precedent for the SEC to determine if any penalties get applied to GTEM. AIMHO.
No worries, Jet. You can never be too careful on these boards. Just look at what Joe and Luis apparently did with electronic documents?
All, it was a cut and paste from the PDF downloaded off PACER. No mods other than the IHUB text feature to emphasize the interesting opinion of the SEC.
https://pacer.login.uscourts.gov/cgi-bin/login.pl?court_id=00idx
You pay per page view. It is a nice tool for getting some details as the case unfolds rather than waiting for the final verdict.
jet...why don't you pay the money to join PACER and see what you find.
The SEC filed their response yesterday and here is an excerpt from their response to Joe. As could be expected, the SEC requests that the court not dismiss charges. I am not sure if the court responded or if another date has been set for further process.
Monterosso argues that the Third Claim for Relief, which alleges that he aided and
abetted GlobeTel’s violation of Section 10(b) and Rule 10b-5 fails to allege that Monterosso
knew how the fraudulent invoices and CDRs would be used in order to establish that he
knowingly and substantially assisted GlobeTel’s violations. Mem. at 13. Section III.A.1. above
supports the claim that Monterosso committed a primary violation of Section 10(b) and
Rule 10b-5 when he caused GlobeTel to make material misstatements. Therefore, these same
allegations support a claim that he provided knowingly “substantial assistance” to GlobeTel’s
violation of the same provisions. Moreover, the Complaint also includes allegations establishing
the basis for alleging Monterosso had knowledge of GlobeTel’s use of the false invoices and
CDRs:
(1) the purpose of the agreement between GlobeTel and Vargas’ company,
CSI, was to “build telecommunications revenue . . .” Compl. ¶ 19;
(2) Monterosso knew GlobeTel could not record revenue generated by
Centerline’s “off-net” telecom business without invoices and CDRs,
Compl. ¶ 35;
(3) GlobeTel’s finance department requested CDRs from Monterosso to prove
that Volta, Lonestar and Centerline had actually engaged in the telecom
transactions for which invoices had been submitted, Compl. ¶ 88;
(4) Monterosso knew GlobeTel’s auditors had specifically requested CDRs in
order to compare them to the invoices and confirm that the telecom
“minutes” had actually been bought and sold, Compl. ¶ 92; and
Case 0:07-cv-61693-JAL Document 29 Entered on FLSD Docket 01/28/2008 Page 19 of 27
15
(5) Monterosso knew the fake invoices and CDRs relating to “off-net”
revenue would be presented to GlobeTel’s independent auditors. Compl. ¶
93.
These allegations create a plausible inference that Monterosso knew that GlobeTel would use the
fraudulent invoices and CDRs to record revenue that would be incorporated into GlobeTel’s
filings and other reports of revenue.
Monterosso argues that the Fourth Claim for Relief alleging that he aided and abetted
GlobeTel’s violation of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-3
should be dismissed because there is no allegation that he had any involvement in, or
responsibility for, filing of GlobeTel’s annual and quarterly reports. Mem. at 15. At the risk of
repetition, a claim of aiding and abetting requires allegations that a defendant knowingly and
substantially assisted a violation of the securities laws. As alleged in the Complaint, Monterosso
created and submitted false invoices and false CDRs to GlobeTel knowing they would be relied
upon by to record revenue in GlobeTel’s quarterly and annual reports. Compl. ¶¶43-44, 47-50,
53-55. The Complaint also alleges that as a direct result of Monterosso’s fraudulent scheme,
GlobeTel overstated its revenue in its quarterly and annual reports during fiscal years 2004
through 2006 by a total of approximately $119 million. Compl. ¶¶ 57-61. These allegations
establish that, at the very least, Monterosso knowingly provided substantial assistance to
GlobeTel’s violation of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-3
thereunder.
Finally, for all the reasons explained above, Monterosso’s claim that the Fifth Claim for
Relief alleging that he aided and abetted GlobeTel’s violation of Section 13(b)(2)(A) fails.
Monterosso asserts that the Fifth Claim fails because there is no allegation that he had the ability
Case 0:07-cv-61693-JAL Document 29 Entered on FLSD Docket 01/28/2008 Page 20 of 27
16
to influence the individuals who controlled and maintained GlobeTel’s books. Mem. at 16.
However, this argument attempts to superimpose upon an aiding and abetting allegation a
requirement that does not exist.
As explained above, an allegation of aiding and abetting need only allege that Monterosso
knowing provided substantial assistance to GlobeTel’s violation of Section 13(b)(2)(A) by
maintaining false and misleading books and records. To satisfy this requirement, the allegation
need not assert that Monterosso had any control over the individuals who actually made entries in
GlobeTel’s books and records. It is enough that Monterosso provided the fodder for the entries
that were made in GlobeTel’s books and records, knowing the information he provided was false,
and that it would be used by GlobeTel to record millions of dollars in “off-net” revenue in the
company’s books and records. Compl. ¶¶ 117-19.
Monterosso’s reliance upon SEC v. Cedric Kushner Promotions, Inc., 417 F. Supp.2d 326
(S.D.N.Y. 2006) to support his argument is misplaced. Kushner involved a motion for summary
judgment that was granted because the facts did not support the aiding and abetting allegation.
Id. at 335-36. Whether the facts will support an allegation is irrelevant to a motion to dismiss
pursuant to Rule 12(b)(6), which is only concerned with whether, assuming the facts to be true,
the complaint states a cause of action. See Hishon, 467 U.S. at 73. In any case, the court in
Kushner granted summary judgment on the aiding and abetting claim because it found that the
defendant played a “very background role” in preparation of the company’s reports and had no
part in creating the fraudulent financial statements that were incorporated into the company’s
annual report. Kushner, 417 F.Supp.2d at 329. Consequently, the court concluded there was no
evidence that the defendant’s conduct proximately caused the underlying fraud. Id. at 335. In
Case 0:07-cv-61693-JAL Document 29 Entered on FLSD Docket 01/28/2008 Page 21 of 27
17
contrast to the defendant in Kushner, the Complaint alleges that Monterosso was the architect of
the fraudulent scheme that directly resulted in GlobeTel recording and reporting revenue that did
not exist. In other words, but for Monterosso’s conduct, none of the violations of the Securities
Act or Exchange Act alleged would have occurred.
"off-net" revenue programs are a legitimate practice in the telecom field. How the revenue is recorded and recognized is the issue.
GTEM and the accountants and auditors recognized and recorded the telecom minutes as gross dollars instead of net.
Mistake or scam?
The bean counters and other management types should be held responsible for knowing this fact about the revenue recognition. If both parties knew they should only use net dollars but still decided to use gross instead, the accountants should be held liable as well.
Now, if accounting knew they could only use net dollars, requested those net dollar figures, and GTEM supplied them with gross dollars disguised as net dollars....you have a scam.
Where would those scam figures come from? Globetel executives. Now, through process of elimination:
After over a year’s investigation crossing two continents, the SEC was apparently unable to elicit evidence sufficient to charge GlobeTel’s executives
But, who is being charged by the SEC?
Joe and Luis
AIMHO
We should be hearing more court info next week since responses are due Monday, for Joe's and Luis' Motions to Dismiss and Request for More Information.
What about the statement from Luis' defense?
"After over a year’s investigation crossing two continents, the SEC was apparently unable to elicit evidence sufficient to charge GlobeTel’s executives who devised an “off-net” revenue program with any securities violations, undoubtedly because of these executives’ refusal to cooperate with the SEC."
Here is Luis' defense making a statement on 1/11/2008. Does he know something that we do not?
If Globetel did not cooperate, I would think Joe or Luis would have done so in order to bring down any guilty individuals along with themselves. But here is the statement on 1/11/2008, months after Joe and Luis received their Well's, and still no SEC charges.
Just as some are accused of ignoring the apparent guilt of GTEM, the argument could also be made that some are ignoring the possibility that minimal or no SEC charges will be filed.
If GTEM can avoid SEC charges just by refusing to cooperate, I think that sets the bar for all companies under SEC investigation. The problem with that is for every group refusing to cooperate, there is a group who is willing to do so or someone steps forward as the whistle-blower. There has been plenty of opportunity for someone to present compelling evidence to level SEC charges, but nothing as of yet.
Whatever happens, GTEM still needs a viable business to increase shareholder value. They have shown items of potential value, but without any sort of dollars tied to the technology, we have no way of knowing what they will mean to the bottom line and this company's future.
Here is a link to a PDF document from Talcom which describes an aerostat product which is deployed in Israel (pages 17-19). Their version is tethered, but based on the description of the transport and deployment logistics, you can imagine the improved functionailty of an untethered version.
http://www.talcom.co.il/talcom.pdf
It's a WAG to think Sanswire/TAO is involved with any of this, but you never know.
I think so too. Although we never saw what a "skysat" was supposed to look like.
Jet, that part of being uncooperative, I thought, came out in 2006 as part of the AMEX delisting or original SEC investigation kickoff. Who was uncooperative? I have no idea as no individual names have ever come up - just the company as a whole I guess.
I find it interesting that Luis' defense is saying that the SEC could not come up with proper charges because GTEM was uncooperative. If this also includes Luis' 15,000 documents, they did not find enough in there either?
Unfortunately, it was discovered only after the production that the response was not complete because the reproduction of certain electronic information was unintentionally omitted on the hard copy that was printed. The missing information was the “cc” recipients of each email as well as any attachments to the emails. This missing information was extremely important because it showed who was privy to pertinent information. The SEC was immediately advised of this unintentional oversight yet it failed to request or obtain a complete production from Vargas
Here was Luis' chance to clear his name and help Joe's cause while implicating the truly guilty. To "unintentionally" omit CC and attachement names on an email reproduction seems a little difficult. Were we seeing some examples of this on Joe's site?
We haven't seen the "smoking gun" first hand. Evidence must be in the hands of the SEC to implicate Joe and Luis of falsifying documents. If evidence also exists that implicates GTEM management, I think Joe and Luis would have produced it ASAP once the charges were leveled against them. You are correct, it just might come out in time, but so far, nothing to implicate upper management has been presented - only alleged by the defense.
Some other points from Luis' defense:
Not a single investor relied on any information allegedly supplied by Vargas absent the translation of that information by GlobeTel executives who were well aware of the nature of the “off-net” program. Nothing that Vargas allegedly submitted to GlobeTel was misleading, and thus he cannot be found liable for a primary violation of the securities laws and regulations.
The SEC has alleged no facts from which it can be inferred that Vargas must have been aware that his work for GlobeTel would create a “danger of misleading buyers or sellers.” As the SEC acknowledges, Vargas’s background is in bookkeeping, somewhat ordinary work. According to the SEC’s allegations, Vargas did not handle negotiations for CSI, he did not negotiate the agreements between CSI and GlobeTel, and he did not try “to convince other telecom companies to enter into “‘Partner Incentive and Financing Agreements’” with Centerline. (D.E. 1, ¶ 24-31). Vargas never participated in or reviewed GlobeTel’s public filings or press releases; there is no allegation that he had any role in GlobeTel’s decisions to record and publish the revenues as it did. The conduct alleged against Vargas does not rise above the level of business management to achieve the level of awareness and culpability that warrants application of the securities fraud statutes.
The strongest allegation that the SEC levels at Vargas is that he “withdrew money from CSI’s account, which he kept.” (D.E. 1, ¶ 96). By contrast, the SEC makes a point of alleging that Monterosso took $300,000 from the account and had his personal credit cards and rent on a residence and a storage unit paid by CSI. (D.E. 1, ¶ 96). Even after months of investigation, the SEC hedges on whether Vargas received anything significant from GlobeTel. The SEC also acknowledges that CSI legitimately earned revenues and that Vargas worked at CSI for almost three years. (D.E. 1, ¶¶ 11, 95). The reasonable inference from these allegations – and, more tellingly, the SEC’s omissions – is that Vargas accepted some remuneration for the services he provided CSI, not that Vargas obtained money or property by making untrue statements of material fact or omitting a material fact necessary to make statements not misleading. Even if Vargas had so obtained payments from GlobeTel – and there is absolutely no allegation that GlobeTel ever directly paid Vargas – the transaction would be an issue between Vargas and GlobeTel, not a securities issue.
As the Complaint implicitly recognizes, Vargas was a low-level employee who did not maintain or control GlobeTel’s books, records or accounts. The Complaint says that GlobeTel executives, allegedly along with Monterosso and Vargas, devised a scheme that would allow GlobeTel to book more revenue and that GlobeTel requested invoices and CDRs as part of that plan. (D.E. 1, ¶ 32). If, as the Complaint alleges, Vargas prepared invoices as part of this scheme, these invoices could in no way have deceived the GlobeTel executives who devised the alleged scheme. If the GlobeTel executives knew about the alleged scheme and the allegedly false invoices, none of Vargas’s actions caused GlobeTel to falsify its books. Rather, GlobeTel executives, knowing full well the nature of the alleged invoices, chose to use those invoices to beef up the revenues that GlobeTel executives – not Vargas – recorded and reported
Here is the intro to Luis's Defense followed by the intro to Joe's defense:
MEMORANDUM OF LAW
Defendant Luis E. Vargas states in support of his motion to dismiss the Complaint with prejudice and his motion for a more definite statement:
INTRODUCTION
The SEC’s claims against Vargas present a test case to see how far down a corporate ladder the SEC can reach to allege securities fraud. By the SEC’s own admissions, Vargas was not an officer of GlobeTel Communications Corporation, the publicly traded company investigated by the SEC, or even a member of its upper level management such that he was involved in recording or reporting GlobeTel revenues. Vargas’s negligible role in GlobeTel’s allegedly fraudulent reporting is reflected in the short shrift the SEC gives Vargas in the Complaint. Of the 96 paragraphs of general allegations, only 14 focus on Vargas or Vargas working under the supervision of or along with Monterosso. Forty-two paragraphs (D.E. 1, ¶¶ 12-15, 34, 56-93)1 deal primarily with GlobeTel, 15 deal with Monterosso and GlobeTel (¶¶ 18-23, 31, 33) or Monterosso (D.E. 1, ¶¶ 10, 25-30), 16 paragraphs allege conduct attributed to “Monterosso or Vargas, at Monterosso’s direction” (D.E. 1, ¶¶ 36, 40-43, 46-49, 52-54), and the first nine paragraphs are general allegations concerning venue and the nature of the action. This leaves 14 paragraphs – out of 96 – that focus on either Vargas or Vargas and Monterosso. This test case should not be allowed to proceed. First, the SEC has not alleged facts sufficient to state a claim upon which relief could be granted. Instead, the SEC relies on conclusory allegations that deceptively sweep together ambiguous factual allegations. Each count does little more than simply restate the language of the statutes or rules. Second, the Complaint improperly lumps together the defendants, making it impossible for Defendant Vargas to determine the contours of the allegations against him to sufficiently prepare a response and a defense. Third, the Complaint lumps together as many as six causes of action into one count by joining three different types of violation by the conjunction “or” and attributing one or more of those violations to both defendants. For these reasons, the Court should dismiss the Complaint against Vargas. If it does not, it must, in accordance with Rule 12(e) and Eleventh Circuit case law on that rule, instruct the SEC to file a more definite statement.
Intro to Joe's defense:
I. INTRODUCTION
In this matter, Plaintiff Securities and Exchange Commission (the “Commission”) alleges
that Defendant Joseph J. Monterosso (“Mr. Monterosso”), along with co-Defendant Luis E.
Vargas (“Mr. Vargas”), engaged in a fraudulent scheme to generate fictitious revenue for a
company by creating false invoices that reflected business transactions that never occurred, and
that the fraudulent scheme caused the company to maintain books and records that falsely and
inaccurately reflected the company’s financial condition, and to issue materially false and
misleading periodic reports, registration statements, and press releases that materially overstated
the company’s financial results for numerous quarters. By engaging in the allegedly fraudulent
scheme, the Commission alleges that Mr. Monterosso violated numerous provisions of the
federal securities laws, and also aided and abetted the company’s violations of numerous
provisions of the federal securities laws. For the alleged violations, the Commission seeks a
permanent injunction, disgorgement and civil penalties, and an “officer and director” bar against
Mr. Monterosso. However, the complaint is deficient for several significant reasons, and should
therefore be dismissed for the reasons explained below.
holter, I don't think anyone can say at this point since no "official" word has come out, but imagine if that is the case?!
This might just be defensive posturing - the defense is trying to paint the picture of Luis as an employee with little authority and power who was just trying to earn a living and follow orders. The SEC was not able to pin anything on the top brass so they had to find someone as a scapegoat and Luis and Joe were the ones.
The credibility of both the SEC and GTEM are brought into question, thus attempting to raise doubt as to the validity of the charges against Luis who cooperated by producing the most documentation of the case vs. little documentation from corporate due to a lack of cooperation or withholding of evidence.
Playing devil's advocate, I guess the scenario exists where Luis and Joe were the only one's to receive the Well's Notice until Joe's website and who knows what else may have brought about further questioning of GTEM. Would GTEM have recieved the Well's anyway or did Joe have a hand in that? Remember Joe's parting shot on his site was something along the lines of it "served it's purpose" or similar statement?
Also, if Joe's emails could be believed, it seemed as if he still held a position of importance up through his abrupt termination. A ploy by GTEM to keep him engaged while further inquiries were being made in the background or were they suspect, but not convinced, until the very end?
The case is bizarre and since it's not over yet, anything can happen.
Oh yeah....IMHO
Cole, Joe did not level any charges against Globetel in his response. If I read it correctly, it was pretty much like others have said - Joe's defense is to have the case dismissed due to how the SEC presented the case - not anything that Globetel had done.
The tone from Luis' lawyer is definitely more colorful and accusatory toward the SEC and Globetel in terms of how the case was handled and the cooperation of the parties involved.
If possible, get the documents through PACER or some other means and please share your thoughts.
More good stuff from PACER - Luis' response. Look at the first sentence.
After over a year’s investigation crossing two continents, the SEC was apparently unable to elicit evidence sufficient to charge GlobeTel’s executives who devised an “off-net” revenue program with any securities violations, undoubtedly because of these executives’ refusal to cooperate with the SEC. By contrast, Luis Vargas, a low level employee with a bookkeeping background, has borne the brunt of the SEC’s investigation and now faces allegations of securities fraud among other violations of the federal securities laws. Such allegations against Vargas are unwarranted, untrue, and as discussed below, must be dismissed. The SEC’s Lengthy and Unfocused Investigation
The SEC has virtually unlimited resources to investigate potential violations of the federal securities laws. See Section 20(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77a et seq.; Section 21(a) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78a et seq. It chose to focus its regulatory sites on GlobeTel,2 its officers, employees and countless others. During the spring of 2006, the SEC initiated an informal inquiry into GlobeTel. Several months later, on September 21, 2006, the SEC obtained a formal order of investigation. During the next 14 months, the SEC issued subpoenas for documents and testimony from dozens of entities and individuals. See Section 19(c) of the Securities Act;3 Section 21(b) of the Exchange Act.4
From the beginning the SEC’s investigation was akin to a poorly planned fishing expedition because it lacked focus and explored many different theories of potential wrongdoing. Initially, the SEC staff focused on certain business relationships with GlobeTel’s subsidiaries,
2 Established in 2002, GlobeTel is a Delaware corporation which is currently headquartered in Fort Lauderdale, Florida. (D.E. 1, ¶ 12). At all relevant times it was a public company with several subsidiaries. According to its filings, GlobeTel was engaged in the business of providing domestic and international telecommunications services, primarily involving internet telephone service using voice over internet protocol technology and equipment, stored value services and wireless communications. As such, the company and its officers were very sophisticated in utilizing technology relating to communications and conducting business in this arena. Sanswire Networks, LLC and HotZone Wireless, LLC, which were unrelated to Vargas. Later, the staffs’ investigation turned to explore potential violations of stock option backdating, false press releases, and insider trading, which were also unrelated to Vargas. Finally, the SEC sought to investigate Vargas. They looked into both his employment with a GlobeTel subsidiary, Centerline Communications, LLC (“Centerline”), and his prior employment with a private company, Carrier Services, Inc. The SEC encountered substantial obstacles from GlobeTel regarding all aspects of its investigation. Initially, GlobeTel failed to provide any meaningful response to the SEC’s voluntary request for information. Likewise, in response to an SEC subpoena, GlobeTel initially stated that it had very few, if any, documents related to the SEC’s investigation. Ultimately, GlobeTel produced very few documents to the SEC and it failed to cooperate with the SEC’s investigation. Moreover, it appears that there was a concerted effort to prevent the production of relevant information. Upon information and belief, a GlobeTel officer intentionally interfered with the SEC’s investigation by withholding (and perhaps destroying) relevant documents that should have been produced to the SEC. One can only conclude that GlobeTel failed to cooperate with the SEC’s investigation and withheld valuable evidence because its cooperation and production of evidence would incriminate GlobeTel’s officers. Contrary to the SEC’s experience with GlobeTel, Vargas fully cooperated with the SEC’s investigation. In response to several subpoenas, Vargas produced over fifteen thousand (15,000) pages of documents. The SEC advised that this was the single largest production of documents from any entity or individual in the GlobeTel investigation. Most of the documents produced by Vargas included email communications. Unfortunately, it was discovered only after the production that the response was not complete because the reproduction of certain electronic information was unintentionally omitted on the hard copy that was printed. The missing information was the “cc” recipients of each email as well as any attachments to the emails. This missing information was extremely important because it showed who was privy to pertinent information. The SEC was immediately advised of this unintentional oversight yet it failed to request or obtain a complete production from Vargas.
Upon information and belief, the SEC took testimony from all of GlobeTel’s former and present officers, including Tim Huff (CEO/CTO), Lawrence Lynch (COO/CFO), Thomas Jimenez (CFO), Jonathan Leinwand (General Counsel), Jesus Quintero (comptroller), John Coniglio (outside accountant), in addition to countless others. Many of these testimonies took multiple days to complete. In fact, the SEC staff was so committed to ferreting out potential wrongdoing that several members of the staff traveled to Australia to pursue the “investigation”. At the end of its 14-month multi-pronged investigation, the SEC initiated the instant action, an alleged revenue recognition fraud, against only two individuals. The SEC alleged that Vargas was a willing participant in a multi-year $119 million dollar scheme to defraud the investors of GlobeTel. (D.E. 1, ¶¶ 1 and 2). Nonsense. Vargas was a low level employee who did not obtain a college degree and he certainly was not a CPA. He is a family man who served as a sergeant in the Marine Corps and also served in the reserves (his son is also a Marine who was wounded in Iraq). Vargas was not an officer at GlobeTel or its subsidiary, Centerline. Additionally, he did not maintain the books and records of GlobeTel or its subsidiary Centerline. Furthermore, Vargas had no actual, apparent or implied authority to formulate accounting policies or recognize revenue at GlobeTel. To be sure, Vargas was at the absolute bottom of the totem pole at Centerline. Vargas did not supervise any other employee. What did Vargas do at Centerline? Simple, he took direction and followed instructions from upper level management at GlobeTel (i.e., its officers). Vargas was not an employee in GlobeTel’s accounting department and he was not invited to attend (nor did he attend) any accounting meetings at GlobeTel. Vargas did not maintain the books and records of GlobeTel (or its subsidiaries) and was not responsible for making any entries into its books and records. He did not formulate or have any input into GlobeTel’s internal controls. Vargas did not report to GlobeTel’s CFO. Moreover, Vargas did not draft or review any of GlobeTel’s financial statements and SEC filings (e.g., including quarterly and annual filings as well as registration statements). And, Vargas had very limited contact with GlobeTel’s auditors. Certainly, he never discussed revenue recognition with GlobeTel’s auditors. Vargas merely followed orders. GlobeTel’s Scheme to Book Revenue
According to the Complaint, “in about October 2004 [several months before Vargas became an employee of GlobeTel, according to ¶ 11 of the Complaint], Monterosso, Vargas and GlobeTel executives devised an ‘off-net’ revenue program.” (D.E. 1, ¶32). According to the Complaint, this program allowed the generation of revenue “from telecom traffic that did not
pass through the switch in Los Angeles that was owned by Monterosso and controlled by Centerline.” (D.E. 1, ¶ 32). In other words, according to the SEC, GlobeTel executives, allegedly along with Monterosso and Vargas, sought a way to “generate” revenue even though it was not providing services through its switch. According to the Complaint, GlobeTel then recorded and reported this revenue. (D.E. 1, ¶¶ 56-61). GlobeTel’s finance department, according to the Complaint, “asked Monterosso and Vargas” for invoices to customers (presumably those buying the use of someone else’s switch service) and call detail records (commonly referred to in the telecom industry as “CDRs”) documenting each call made through a switch other than the one owned by GlobeTel (incorrectly identified in the Complaint as owned by Monterosso). (D.E. 1, ¶ 34). According to the Complaint, these “invoices – and the technical data that Monterosso and Vargas provided to the company’s auditors – caused [sic] GlobeTel to materially overstate its revenues for eight consecutive quarters and caused [sic] GlobeTel to fail to keep accurate books, records and accounts.” (D.E. 1, ¶ 4). The SEC alleges that from September 2004 until June 2006, GlobeTel and its subsidiaries overinflated revenue by $119 million which was described as “off net” revenue. (D.E. 1, ¶ 2). The “off net” revenue equated to approximately 80% of GlobeTel’s reported revenue during this period of time – roughly four out of every five dollars. Id. It is inconceivable that such an overstatement in revenue could occur without the knowledge, consent and approval of upper management. During this period of time, GlobeTel had a finance/accounting department, which included an internal accounting staff of four individuals (including a full-time CFO) and an external accountant. It also had a CEO. Since it was a public company, its financials were reported on a quarterly basis and reviewed by auditors. The financials were also audited once a year. Its CEO and CFO also certified the accuracy of all of these quarterly and annual reports pursuant to the Sarbanes-Oxley Act of 2002. Interestingly, the SEC has not included GlobeTel’s CEO or CFO in this action relating to false financial statements, and no Sarbanes-Oxley signing violations were alleged in the SEC’s complaint.
The SEC alleges that the primary motive for Vargas to engage in this alleged scheme to defraud was financial compensation, but the SEC refused to provide the specific amount Vargas allegedly kept, undoubtedly because any such amount was insignificant. (D.E. 1, ¶¶ 94-6). Even if this were true (and it is not), then several other upper level managers were also complicit, yet
such individuals have not been included in this action. GlobeTel’s officers and directors, not Vargas, profited from any alleged scheme to fraud. Upon information and belief, GlobeTel’s officers and directors sold large blocks of GlobeTel’s stock and received substantial compensation from these transactions. The SEC failed to pursue this theory or include these actors in this matter.
Cole, that is your interpretation, but it can also be interpreted that the actions of Joe and Luis are what caused GlobeTel to violate the laws.
GlobeTel has their Well's Notice and Joe and Luis have theirs too. The difference is, Globetel has not been dragged into the court system by the SEC with any formal charges. GlobeTel is not in the clear, by any means, but it remains to be seem if any formal penalties are ever assessed against them by the SEC, or if they will have a day in court like Joe and Luis.
Joe did respond in PACER and this is his conclusion (responses due to Joe and Luis motion to dismiss by 1/28/08). Joe's defense is that the SEC failed to make a proper case?:
IV. CONCLUSION
As described above, Mr. Monterosso is charged with violating the federal securities laws,
and with aiding and abetting GlobeTel’s violations of the federal securities laws, by creating
false invoices and CDRs and submitting them to GlobeTel, who incorporated information from
the false invoices and CDRs into its books and records, and used information from the false
invoices and CDRs in its periodic reports, press releases, and securities registration statements.
The Commission, however, has completely failed to satisfy the Federal Rules of Civil
Procedure’s pleading requirements by failing to adequately plead Mr. Monterosso’s primary or
secondary violations. Based upon that complete failure, it should not be allowed to proceed in its
claim against Mr. Monterosso.
PACER shows we need to wait a little longer for Luis' response. I did not see anything on Joe.
01/11/2008 21 MOTION to Dismiss 1 Complaint by Luis E. Vargas. Responses due by 1/28/2008 (Wallace, Dorothy) (Entered: 01/11/2008)
01/11/2008 22 MOTION for More Definite Statement by Luis E. Vargas. (Wallace, Dorothy) (Entered: 01/11/2008)
01/11/2008 23 MOTION to Dismiss 21 MOTION to Dismiss 1 Complaint, 22 MOTION for More Definite Statement - Memorandum in Support of - by Luis E. Vargas. Responses due by 1/28/2008 (Wallace, Dorothy) (Entered: 01/11/2008)
At the bottom of the article, they list Cudjoe Key as one of the sites. Did it look like the one pictured?
http://www.fas.org/nuke/guide/usa/airdef/tars.htm
FWIW, here is a link to photos taken from the LOTTE back in 2000. The clarity would indicate that it is capable of much better imaging than what we have seen.
If you do a Google translation to English, you will see the description of the video/photo equipment used. Also, without the translation, I would assume that these photos were taken by the large airship in the top right picture, but after translation, it is stated that the Lotte is taking pictures of the "Zepplin NT"
http://www.isd.uni-stuttgart.de/lotte/lotte/luftbild.htm
Could Empire Challenge 08 be a possible venue as well?
http://www.itmentor.com/ec08.htm
2007 seemed to concentrate on UAV usage
http://www.itmentor.com/ec07.htm
Very nice. Now what technology will they use that will transmit 100 miles and weigh around 22 lbs and consume less than 100 watts? Also, a ceiling if 2000 feet with this payload?
Does the Navy set these parameters or does Sans/TAO already have all their ducks in a row with exactly what technology they will be showing?
Nilrem.....anything come up in your searches?
One thing, though - "ojbective"? C'mon GTEM...let's be more careful with the spellchecking.
the sas-51 site now shows pix which look to be taken from the video.
By any chance, can someone translate any of the conversation from any of the videos? Is it anything significant? Thx.
could the quality be attributed to not only interference, but maybe it is a video of a monitor showing the surveillance video vs. a direct feed? I was wondering because of the scanlines.