The U.S. Securities and Exchange Commission (SEC) announced Monday that it has filed suit against a Florida Internet company, Families On Line (FOL) and two executives for allegedly bilking Christian investors out of almost US$4 million.
The suit, which was filed in a Miami federal court Friday, alleges that Mark Thurman, FOL’s chief executive officer, and Robert Fiene, its chief operating officer, used the money invested to finance an expensive lifestyle that included purchases of drug paraphernalia and adult novelties.
In addition to the civil charges, both Thurman and Fiene were indicted on criminal charges by the United States Attorney’s Office in Miami. An emergency order freezing the assets of FOL, Thurman, and Fiene was entered by the federal court.
According to FOL, the company was founded by Thurman to allow families to “experience the marvels of this new frontier without the apprehension and fear that so many rightfully now have.” The Web site’s “About FOL” page includes quotations from Bill Gates and the Rev. Billy Graham.
For $19.95 a month subscribers to the Fort Lauderdale-based Web site are offered Internet access that filters pornography, violence, gambling, and other objectionable content.
According to the SEC, the FOL falsely claimed to be affiliated with the Trinity Broadcasting Network (TBN) and presented investors with a forged letter from TBN stating that TBN was committed to helping FOL build its consumer base.
Other false claims made by FOL and its executives include the claim that the company would have 2.5 million subscribers and generate in excess of $120 million in profits in its first year. According to the suit, the FOL Web site never had more than 150 subscribers.
According to the SEC, potential investors were also told “complete fabrications about an impending initial public offering and supposed SEC approval of the offering.”
Lured by the promise of investing in a company that “filtered with the family in mind” and the false claims made by FOL, 410 investors — primarily fundamentalist Christians — purchased $3.9 million in unsecured stocks and warrants in FOL between July 1999 and December 2000.
According to the charges filed, Thurman and Fiene are convicted felons who not only bilked the Christian investors, but also diverted at least $1.8 million in investor funds to finance an expensive lifestyle.
The pair allegedly used a debit card tied to FOL’s bank account to pay for items from adult novelty and drug paraphernalia stores, and they used investor funds to purchase boating lessons, a BMW automobile, a custom motorcycle and jewelry. The complaints also allege that Thurman and Fiene paid for their household and living expenses, as well as legal fees, with FOL funds. Thurman and Fiene allegedly used FOL funds to retain a criminal attorney for matters unrelated to the FOL site.
Both Thurman and Fiene were arrested Friday and face up to 30 years in prison if convicted on all charges.
The FOL Web site, oddly enough, was in the media spotlight for a different reason in December when the company claimed it was scammed into offering PlayStation 2 consoles for sale through its site. FOL said that a supplier promised to supply the consoles to the ISP by late November, but never delivered.
Thurman said at the time the FOL site had received orders for over 9,000 PlayStation 2 consoles. However, Thurman said that “despite numerous attempts, promises and stories, we have not received the units as represented.”
Thurman then claimed that he had already enlisted the help of the Fort Lauderdale Police Department Economic Crimes Unit and would contact the Federal Trade Commission for assistance in dealing with “the parties responsible for placing us and our loyal customers in this position.”