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Saturday, June 15, 2024 | Back issues
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Wireless Firm Juggled Books, SEC Says

(CN) - A Dallas-based wireless Internet service raised $9.5 million from 200 investors through exaggerated claims and omissions of material facts - such as the $620,000 in "loans" it made to its executives, the SEC says. It sued TierOne Converged Network, its CEO Kevin Mark Weaver and CFO Ronald Celmer in Dallas Federal Court.

The SEC claims that Weaver and Celmer failed to inform investors that Weaver had been sanctioned for numerous violations by the Financial Industry Regulatory Authority, and had been barred from the securities industry.

The SEC says Weaver and Celmer falsely claimed that TierOne had been contracted, with another firm, Zyterra Solutions, by the city and school district of Red Oak, Texas to provide wireless communications systems for the city and schools. The defendants claims those agreements gave TierOne "marketing access to nearly 7,500 students and 700 faculty and employees."

In fact, although TierOne had a business relationship with Zyterra, the municipal contract pertained to Zyterra only, the SEC said.

Later, TierOne issued a press release announcing it was merging with Zyterra - but there was no such agreement, the SEC says.

And the men claimed to have proprietary software to indentify the signal strength of potential customers, giving it a "competitive advantage," though in fact, the SEC says, "one of TierOne's technicians had merely combined various commercially available software products and Internet applications, including some that were available through the Internet."

"This combination of products was not 'proprietary' in that it was not copyrighted, patented or otherwise protected," the SEC said. "These representations were therefore misleading."

The SEC adds that it found accounting discrepancies at TierOne, including a vast overstatement of assets, expenses listed in the company's ledgers that should not have been there, and failure to properly document the loans to management as promissory notes.

Weaver is believed to have borrowed $370,000 from the company, while Celmer borrowed $248,000. As of Dec. 31, 2008, TierOne's assets were overstated by 37 percent, the SEC said.

It seeks a permanent injunction, civil penalties, disgorgement, and a monitor to supervise TierOne's business and fund raising.

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