The SEC filed a settled action against TierOne Converged Networks, Inc., a wireless internet service provider, and its two principals, Kevin Weaver and Ronald Celmer. The case arose out of the sale of TierOne’s securities as private placements. A key part of the settlement is the appointment of a monitor to supervise certain key company operations for two years. SEC v TierOne Converged Networks, Inc., Civil Action No. 3:10-CV-00840 (N.D. Tex. Filed April 30, 2010).

The Commission’s complaint claimed that, from July 2006 through April 2009, the company raised about $9.5 million from approximately 200 investors in 34 states through a continuous unregistered offering of its securities. During this three year period, the defendants disseminated seven private placement memoranda. The offerings were done under Rule 506 of Regulation D. Investors were solicited through an in-house sales force. At least 46 of the investors were not accredited.

The private placement memoranda did not contain audited financial statements. In several instances, the PPMs omitted and/or exaggerated or misstated material facts including:

• Several failed to disclose Mr. Weaver’s disciplinary history with FINRA which demonstrated that he had been sanctioned on various occasions.

• One incorrectly stated that TierOne had contracted with the city and school district of Red Oak, Texas and Zyterra Solutions to provide wireless communications systems for certain municipal and school district activities. Although TierOne had a business relationship with Zyterra, it did not have any contracts with Red Oak.

• One incorrectly stated that TierOne and Zyterra had agreed to merge when in fact there was no executed merger agreement.

• One PPM claimed that the company had proprietary software when in fact its engineers had simply combined commercially available software.

• Another failed to disclose significant loans the company made to Messrs. Weaver and Celmer.

• Four of the PPMs materially overstated the assets of the company.

The Commission’s complaint alleged violations of Securities Act Sections 5 and 17(a)(2) &(3).

To resolve the case, each of the defendants consented to the entry of a permanent injunction prohibiting future violations of each of the sections cited in the complaint. Messrs. Weaver and Celemer also each agreed to pay a civil penalty of $25,000. A special master was appointed as part of the consent decrees to monitor TierOne’s disclosures, stock offerings and processes for qualifying accredited investors for two years. See also Litig. Rel. 21510 (Apr. 30, 2010).