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Losers in Lake Forest Scheme to Get 20% Back

Judgment: SEC to return $280,600 that was seized. Co-owner of defunct firm apparently has fled.

January 10, 1998|JAMES S. GRANELLI | TIMES STAFF WRITER

LOS ANGELES — Investors will receive partial refunds on $1.36 million that they lost in an investment scheme run by a Lake Forest man who apparently has fled, the Securities and Exchange Commission said Friday.

The SEC obtained a federal court order earlier in the week that allows it to begin returning $280,600--or about 20 cents on the dollar--that was seized last spring from John C. Rockett, 58, and Affordable Prepaid Cellular Inc., which he co-owned.

The agency hasn't been able to find Rockett since serving him in May with its lawsuit, said Kathleen Bisaccia, an SEC staff attorney.

A federal judge in Los Angeles issued a default judgment against Rockett and his company two weeks ago, ordering them to repay investors. On Monday, U.S. District Judge Richard A. Paez approved the payment of the money that the SEC has found so far..

The company began offering $5,000 corporate notes in January 1997 as part of a private placement to fund its business, providing prepaid cellular telephone service to "credit-challenged" individuals. In less than five months, it raised nearly $1.36 million.

After interviewing only one buyer and two potential investors last May, the SEC took action because of Rockett's long disciplinary history, which includes state court convictions in California and Kansas, Bisaccia said.

At the time, he owed $640,000 in penalties from past disciplinary actions, according to court documents, and was a defendant in a pending SEC action in Texas that accuses him of securities fraud in an oil-and-gas venture called Pro-Tex Pipe & Tubing Corp.

Court papers accuse him of shutting down at least one business and taking investors' money.

The SEC alleged that his Lake Forest operation sought investor funds without revealing that Rockett was a 25% owner. It also failed to disclose that Rockett had been convicted of securities fraud and banned from selling securities in California and eight other states, the SEC contended.

Rockett's prior violations include fraud, misappropriation of investor money and offering unregistered securities.

Rockett's influence surfaced in the terms of offering for the cellular concern, the agency said. Much of the language in the offering, which guaranteed a 16.75% rate of return, was identical to language in the Pro-Tex offering, according to the SEC.

The action against Rockett stemmed from an investigation by the County of Orange Boiler Room Apprehension task force of local, state and federal authorities. The task force targets telemarketing schemes that prey on the elderly.

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