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Univ. of Toledo College of Law

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Monday, November 26, 2007

SEC Files Fraud Charges Against Former GlobeTel Communications Officers

The SEC announced it filed securities fraud charges against Joseph J. Monterosso and Luis E. Vargas, former executives at GlobeTel Communications Corp. of Fort Lauderdale, Fla. The Commission's complaint, filed in the Southern District of Florida on November 21, 2007, alleges that Monterosso and Vargas created $119 million in fake invoices and caused GlobeTel to overstate its revenue for two years.  The complaint alleges that Monterosso and Vargas created hundreds of false invoices from technical data they obtained from their friends in the telecom industry. Those invoices - and the technical data that Monterosso and Vargas provided to the company's auditors - caused GlobeTel to report $119 million in false revenue. This so-called "off-net" revenue accounted for approximately 80 percent of the revenue GlobeTel reported between the third quarter of 2004 and the second quarter of 2006 - four out of every five dollars that the company reported.

GlobeTel has not filed a quarterly or annual statement for any period after the second quarter of 2006. On May 8 and June 29, 2007, GlobeTel filed Forms 8-K announcing that it will restate its financials for 2004 through 2006 to eliminate about $120 million in revenue. On November 2, 2007, the company filed a restated Form 10-KSB for 2004 in which the company reduced its annual revenue by $17.68 million.

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