U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20550 / May 1, 2008

Accounting and Auditing Enforcement Release No. 2822/ May 1, 2008

Securities and Exchange Commission v. GlobeTel Communications Corp., Timothy J. Huff, Thomas Y. Jimenez and Lawrence E. Lynch, Case No. 08-CV-60647 (S.D. Fla., filed May 1, 2008)

SEC Charges Florida Company and Three Former Officers For Accounting Fraud and Unregistered Stock Sales

On May 1, 2008, the Securities and Exchange Commission filed a civil action in the United States District Court for the Southern District of Florida against GlobeTel Communications Inc. and three former officers of the company, Timothy J. Huff, Thomas Y. Jimenez and Lawrence E. Lynch. GlobeTel is a publicly-traded telecommunications company headquartered in Fort Lauderdale, Florida. Huff was GlobeTel's chief executive officer, and Jimenez and Lynch were its chief financial officers during the relevant period. According to the SEC's complaint, Jimenez and Lynch participated in a scheme to inflate GlobeTel's revenue and then hide millions of dollars of unpaid receivables and liabilities between 2004 and 2006. The SEC alleges that GlobeTel recorded $119 million in revenue on the basis of fraudulent invoices created by two individuals in charge of its wholesale telecommunications business. Jimenez and Lynch are alleged to have made, or caused to be made, entries on GlobeTel's general ledger that improperly offset the receivables associated with those revenues against the liabilities, thereby concealing the revenue fraud from investors. Huff is alleged to have caused GlobeTel to sell $1.6 million worth of GlobeTel common stock in 2005 in violation of the registration provisions of the federal securities laws.

The SEC alleges that GlobeTel violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 thereunder, and seeks as relief a permanent injunction, civil penalties, and disgorgement with prejudgment interest. The SEC alleges that Jimenez and Lynch violated Section 17(a) of the Securities Act, violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and aided and abetted violations of those provisions by GlobeTel, violated Rules 13a-14 and 13b2-1 of the Exchange Act and aided and abetted violations of Sections 13(a) and 13(b)(2)(A) & (B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder by GlobeTel, and seeks as relief permanent injunctions, civil penalties, disgorgement with prejudgment interest and officer and director bars. The SEC alleges that Huff violated Sections 5(a) and 5(c) of the Securities Act of 1933 and seeks as relief a permanent injunction and a civil penalty.

Without admitting or denying the charges against him, Lynch consented to final judgment permanently enjoining him from future violations of Section 17(a) of the Securities Act and Sections 10(b), 13(a) and 13(b)(2)(A) & (B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-13, 13a-14 and 13b2-1 thereunder, imposing a five year officer and director bar and ordering him to pay a civil penalty in an amount to be determined by the court. Without admitting or denying the charges against him, Huff consented to final judgment permanently enjoining him from future violations of Sections 5(a) and 5(c) of the Securities Act and ordering him to pay a $30,000 civil penalty.

SEC Complaint in this matter

http://www.sec.gov/litigation/litreleases/2008/lr20550.htm