Earthlink co-founder signs decree over alleged investment scheme
Saturday, June 2, 2001
http://www.siliconvalley.com/docs/news/svfront/033754.htm
LOS ANGELES (AP) -- Reed E. Slatkin, co-founder of Internet service
provider EarthLink, has signed a consent decree with federal regulators
who claimed he mismanaged $230 million invested for Hollywood celebrities
and others.
Slatkin, 52, of Santa Barbara, did not admit wrongdoing in the decree but
agreed not to violate federal securities laws in the future, according to
U.S. Securities and Exchange Commission documents filed Thursday in
federal court.
"It's a reflection of Mr. Slatkin's desire to avoid unnecessary expense
and litigation and concentrate the parties' efforts on locating and
maximizing the value of assets" for investors, said his attorney, Brian
Sun.
The SEC alleged that Slatkin defrauded clients while acting as an
unregistered investment adviser. The consent decree allows the agency to
fine Slatkin and order him to repay investors.
Slatkin also remains under criminal investigation. Although no charges
have been filed, he is discussing a plea bargain with the U.S. attorney's
office, the Los Angeles Times reported Saturday, citing sources close to
the talks.
His lawyer declined to comment on the reported talks, the Times said.
Slatkin invested money for more than 500 people, including fellow members
of the Church of Scientology, Internet executives and Hollywood
celebrities. Three of those investors sued him in April, alleging he had
failed to return $34 million to them.
Slatkin resigned April 26 from EarthLink's board and on May 1 he filed for
Chapter 11 bankruptcy protection. Ten days later, the SEC won a court
order freezing his assets.
Regulators said that between 1985 and April 2001, Slatkin collected at
least $230 million from investors for Swiss securities trading accounts
that never existed. He would allegedly use new investor funds to pay
interest to earlier investors in a Ponzi-type scheme.
Bankruptcy officials and attorneys for the investors estimate that claims
in the case could reach more than $600 million.
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