Cracking down on what they consider a rapidly growing area of investment fraud, state authorities said Monday that they have raided and shut down several operations in Los Angeles, Orange and San Diego counties selling allegedly illegal investments in wireless cable television ventures.
The investment promoters at the core of the case have taken as much as $30 million from more than 3,000 investors starting as far back as August, 1992, according to State Corporations Commissioner Gary S. Mendoza, whose agency conducted the raids last week in conjunction with officials of four other states. Many of the investors, he said, were elderly people and others not sufficiently sophisticated to put their money in such risky ventures.
The selling of interests in wireless cable ventures around the country has become fertile ground for fraud in recent years, industry observers say. In November, Robert L. Schmidt, president of the Wireless Cable Assn., the industry trade group, called the scams "nefarious" and a "cancer on the industry."
The field has attracted unscrupulous promoters in part because it is relatively easy to enter and largely unregulated. Wireless cable differs from conventional cable television in that subscribers receive TV signals via an antenna-like device installed at their homes, rather than through physical cables.
Wireless cable has also become a fraud-ridden area because unscrupulous promoters have largely exhausted the possibilities of other types of investments, observers say. Furthermore, Southern California is traditionally known as the telemarketing fraud capital of the nation.
In the cases involved in last week's raids, promoters promised financial returns of more than 600% over five years at low risk, Mendoza said, calling that an implausible return given they were taking sales commissions of 38% to 50% of the money invested.
They also used television infomercials, cold-calling of prospective investors and other high-pressure sales techniques to entice people to invest, he said. Mendoza cautioned that a full determination of the legitimacy of the ventures--and any possible criminal charges--must await further examination of the materials seized from the offices.
In a statement issued from its Newport Beach headquarters, however, the chairman of one of the firms insisted his company is legitimate and will be "exonerated of any wrongdoing whatsoever."
Jon E. Marple, chairman of Newport Beach-based Micro-Lite Television and a principal of two other firms involved in the crackdown, called the raids "heavy-handed" and said his firm is "a leader in the wireless cable industry."
"We have been active in the overall development and success of this dynamic new technological advance," Marple said, adding that Micro-Lite has been the general partner of two wireless ventures in Boston and Baton Rouge, La., that were later sold to third parties.
Micro-Lite on Monday became a publicly traded company on the Nasdaq market, spokesman Mario (Ike) Iacoviello said. He said the company acquired a shell corporation in a deal that allowed it to go public without an initial stock offering.
Marple was otherwise unavailable for comment Monday, as was Richard A. Weintraub, a San Diego lawyer whose law offices and affiliated companies were also raided last week. Agency officials said a firm associated with Weintraub received a "desist and refrain" order last June to cease selling virtually identical investments.
The raids were conducted by officials of the corporations department and regulatory bodies from Arizona, Kansas, Missouri and Illinois at 10 Orange and San Diego county locations associated with Marple's Marrco Communications of Newport Beach and with Weintraub.
Marple and Weintraub were not charged with a crime, although two telephone salespeople at Emerging Technologies Group, an Irvine firm associated with Weintraub, were arrested and charged with a misdemeanor count of making telephone sales without having been registered with the state. They were identified by a Corporations Department spokeswoman as Charles A. Murphy and Collin J. Procton. They could not be reached for comment Monday.
Mendoza said his agency believes the raided enterprises may have been violating state law by selling unlicensed securities--the cable system interests--and may also have misrepresented the nature of the investments.
The disposition of much of the $30 million is unknown, he said.
The main advantage of wireless cable television is that it can serve customers unable or unwilling to hook up via cable. For the system operator, the technology has the virtue of being exempt from regulation by local municipalities, unlike cable TV.
