AP, Dec. 9, 2002
DAVID B. CARUSO, Associated Press
PHILADELPHIA – Four former executives of a defunct company that once owned Dionne Warwick’s Psychic Friends Network have settled financial fraud charges with the Securities and Exchange Commission.
The SEC said officers of Regal Communications inflated the company’s worth to defraud investors in the early 1990s, when Regal bought the infomercial firm that ran the Psychic Friends 1-900-line phone service and two other companies owned by television personality Joan Rivers.
As part of the settlement, filed Friday, Regal’s former chief financial officer, Bruce B. Edmondson, and its former chief executive, Arthur L. Toll, were barred from serving as officers of any public company. Regal’s former in-house lawyer, Elliot S. Fisher, was barred from representing companies before the SEC.
The SEC also ordered the executives to pay back “ill-gotten gains,” amounting to about $2.2 million, which the government said the men got from selling Regal stock.
Dionne Warwick lent her name to the phone service, in which people paid to talk on the telephone with people claiming to be psychics, and pitched it in television infomercials.
To make Regal appear healthier than it really was, Edmondson and Toll recorded fictitious business revenues, backed them up with misleading documents and bank records, then paid off fake receivables with the company’s own money, investigators said.
In all, the executives shuffled nearly $23 million from Regal’s checking accounts into the accounts of other companies they controlled, then back to Regal, in an attempt to create the illusion of a large revenue stream, prosecutors said.
Those actions helped the company sell $35 million in bonds in 1993, and also inflated Regal’s stock, then traded on the Nasdaq Stock Market.
The SEC filed its complaint in 1998, but delayed action pending the outcome of a simultaneous criminal probe.
The executives were not required to admit wrongdoing as part of the SEC settlement, but Toll pleaded guilty to securities fraud, mail fraud and other charges in 1999 and was sentenced to 48 months in prison.
Edmondson pleaded guilty to similar charges and was sentenced to 36 months. Fisher pleaded guilty to conspiracy and sentenced to six months in jail. Former Regal board member Gerald Levinson pleaded guilty to filing a false income tax return and was sentenced to probation.
Attorneys for the four men did not immediately return phone messages Monday.
Regal, which was based in Fort Washington, Pa., declared bankruptcy in 1994.