UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION

Transcription

1 UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION ADMINISTRATIVE PROCEEDING File No In the Matter of PACKETPORT.COM, INC., RONALD DURANDO, MICROPHASE CORP., ROBERT H. JAFFE, GUSTAVE DOTOLI, M. CHRISTOPHER AGARWAL, and THEODORE KUNZOG, Respondents. NOTICE FOR DISTRIBUTION OF THE DISGORGEMENT FUND If you purchased PacketPort.com, Inc. ( PacketPort.com ) common stock during the period December 13, 1999 through April 11, 2000, you may be eligible to share in the distribution of the $1,075,000 Disgorgement Fund. The Securities and Exchange Commission ( SEC ) filed an enforcement action on November 15, 2005 against PacketPort.com, Inc., Ronald Durando, PacketPort, Inc., Microphase Corp., Robert H. Jaffe, Gustave Dotoli, IP Equity, Inc., M. Christopher Agarwal, Theodore Kunzog, and William Coons, III charging them with securities fraud and other violations in connection with a scheme to pump and dump the stock of PacketPort.com. On October 18, 2007, the SEC settled cease-and-desist proceedings against PacketPort.com and related individuals and companies based on registration and other violations and as part of the settlement, the respondents agreed to disgorge over $1 million into a Disgorgement Fund that will be distributed to investors injured by the alleged misconduct. The purpose of this Notice is to advise you of your rights and of the eligibility criteria that may entitle you to participate in the benefits of distribution from the Disgorgement Fund described in this Notice. This Notice describes the steps you must take to file a Proof of Claim Form in order to be eligible for these benefits. You may write to or Rust Consulting, Inc. (the ) and request a Proof of Claim Form. The Fund will be distributed to eligible PacketPort.com investors who submit valid Proof of Claim Forms. SUBMIT A CLAIM DO NOTHING YOUR LEGAL RIGHTS AND OPTIONS IN THE SETTLEMENTS This is the only way to be considered for payment. You will not be considered for payment. DEADLINE Claim Forms must be postmarked no later than August 1, Call: PLEASE DIRECT ALL QUESTIONS REGARDING THIS NOTICE TO info@packetportdisgorgementfund.com Write: Please read this Notice carefully.

2 FREQUENTLY ASKED QUESTIONS Basic Information... Page 2 1. Why did I receive this Notice? 2. What are the details of the SEC s settlement with Respondents? Who is Eligible... Page 3 3. Who is eligible to participate in the Disgorgement Fund? 4. Who is excluded from the Disgorgement Fund? How to Submit a Proof of Claim Form for Consideration... Page 3 5. What do I need to do to receive a payment? 6. When is the deadline for sending in my Claim Form? 7. How much will I receive if my claim is eligible? 8. When will I receive my payment? 9. Do I give up any legal rights by submitting a claim? If You Do Nothing... Page What happens if I do nothing at all? Getting More Information... Page Are there more details about the Action? 12. How do I get more information? Special Notice to Securities Brokers and other Nominees... Page 4 Inquiries... Page 5 Exhibit A Disgorgement Fund Plan of Distribution... Page 5 BASIC INFORMATION 1. Why did I receive this Notice? You or someone in your family may have purchased shares of PacketPort.com common stock between December 13, 1999 and April 11, This Notice package describes the SEC s enforcement actions, your legal rights, what benefits are available, who is eligible for them, and how to get them. 2. What are the details of the SEC s settlement with Respondents? On November 15, 2005, the SEC filed an enforcement action against PacketPort.com, Inc., Ronald Durando, PacketPort, Inc., Microphase Corp., Robert H. Jaffe, Gustave Dotoli, IP Equity, Inc., M. Christopher Agarwal, Theodore Kunzog, and William Coons, III charging them with securities fraud and other violations in connection with a scheme to pump and dump the stock of PacketPort.com. Specifically, the Complaint alleged that all defendants violated the registration provisions of Section 5 of the Securities Act of 1933 ( Securities Act ), that all defendants, except Coons, directly violated the antifraud provisions of Securities Act Section 17(a) and Section 10(b) of the Securities Exchange Act of 1934 ( Exchange Act ), and Rule 10b-5 thereunder. The Complaint also alleged that Durando, Jaffe, Dotoli, Agarwal, Kunzog and Coons aided and abetted direct violations of the Exchange Act antifraud provisions. The Complaint alleges that the Defendants engaged in a fraudulent pump and dump market manipulation scheme from December 1999 through February 2000, meaning that their false publicity and bogus recommendations about Packet.Port.com resulted in an artificially high price for PacketPort.com common stock during the Purchase Period, December 13, 1999 through April 11, On October 18, 2007, the SEC instituted settled cease-and-desist proceedings against PacketPort.com, Inc., Ronald Durando, Microphase Corp., Robert H. Jaffe, Gustave Dotoli, M. Christopher Agarwal, and Theodore Kunzog for violations of the registration and other provisions of the Securities Act and certain reporting provisions of the Exchange Act. As part of the settlement, the respondents agreed to disgorge over $1 million in connection with conduct occurring in late 1999 and early In connection with the settlement, the Commission s civil action (SEC v. PacketPort.com, Inc, et al., Civil Action No. 3:05cv1747 (PCD) (D. Conn.)) was dismissed with prejudice, and the Court also dismissed by consent charges against PacketPort, Inc., IP Equity, Inc. and William Coons, III. The Commission ordered the respondents to cease and desist from committing or causing violations of the respective provisions of the federal securities laws they each were found to have violated. In addition, Respondent Microphase was ordered to disgorge $700,000, respondent Durando $150,000, respondent Jaffe $125,000 and respondent Dotoli $100,000 for For More Information: Call Page 2

3 a total Disgorgement Fund of $1,075,000, which was paid as of October 15, The Disgorgement Fund constitutes a Qualified Settlement Fund under Section 468B(g) of the Internal Revenue Service, 26 U.S.C. 468B(g), and related regulations, 26 C.F.R B-1 through B. These funds, together with any interest and income earned thereon minus deductions expended or to be expended for taxes and fees, will be distributed in accordance with the provisions of the Distribution Plan to the Eligible Claimants as defined below who file timely and valid Proof of Claim Forms following the procedures set forth in this Notice and on the Proof of Claim Form (the Distribution ). The Distribution Plan is further explained below in the Answer to Question No. 7. WHO IS ELIGIBLE 3. Who is eligible to participate in the Disgorgement Fund? In order to determine whether you will receive a distribution from the Disgorgement Fund, you first must determine whether you are an Eligible Claimant. An Eligible Claimant is any of the following individuals and entities, subject to certain exceptions (see Question No. 4): All individual and entities who purchased PacketPort.com, Inc. common stock during the Purchase Period (December 13, 1999 through April 11, 2000) and who incurred losses. If you have questions about the tax consequences of participating in the Disgorgement Fund, you should consult with your own tax advisor. 4. Who is excluded from the Disgorgement Fund? The following may not be an Eligible Claimant: a) Any current or former officer or director of PacketPort.com, or any of such person s assigns, creditors, heirs, distributees, spouses, parents, children, or controlled entities or affiliates; b) Any defendant or respondent in any action or proceeding brought by the Commission related to conducted described in In the Matter of PacketPort.com, Inc., Ronald Durando, Microphase Corp., Robert H. Jaffe, Gustave Dotoli, M. Christopher Agarwal, and Theodore Kunzog (Securities Act Rel. No. 8858, Oct. 18, 2007), or any such defendant s or respondent s assigns, creditors, heirs, distributees, spouses, parents, children, or controlled entities or affiliates; c) The, its employees, Agents and their immediate family members; and d) Any Eligible Claimant whose pro-rata share losses are less than $ under the terms set forth in the Plan of Distribution. HOW TO SUBMIT A PROOF OF CLAIM FORM FOR CONSIDERATION 5. What do I need to do to receive a payment? To qualify for a distribution payment, you must file a signed Proof of Claim Form with the postmarked by or received by the Claim Deadline, August 1, A Proof of Claim Form is included with this Notice. If you require additional information or forms, you may request them by calling , or you may submit a written request or to the at the address below. Be sure to complete all information requested on the Proof of Claim Form that applies to you, sign the Form and include sufficient documentation reflecting your holdings, purchases and sales of PacketPort.com common stock as requested on the Claim Form. If you do not provide all required information and sign the Proof of Claim Form, your claim may be rejected. 6. When is the deadline for sending in my Claim Form? Your completed Proof of Claim Form must be postmarked by or received by the Claim Deadline of August 1, 2012 and mailed to the following address: For More Information: Call Page 3

4 7. How much will I receive if my claim is eligible? The SEC has prepared a Distribution Plan that provides a mathematical formula for the to determine each Eligible Claimant s Approved Claim based upon the number of each Eligible Claimant s net loss of PacketPort.com common stock. The Disgorgement Fund will be allocated to the Eligible Claimant s pro rata based upon the ratio of the Approved Claim of each Eligible Claimant to the aggregate Approved Claims of all Eligible Claimants. No Approved Claim from an Eligible Claimant will result in a paid distribution of less than $ Each Eligible Claimant s payment is calculated based on the number of: (1) shares of PacketPort.com common stock the Eligible Claimant held at the close of trading on December 12, 1999; (2) shares of PacketPort.com common stock the Eligible Claimant purchased from December 13, 1999 through April 11, 2000; (3) shares of PacketPort.com common stock the Eligible Claimant sold from December 13, 1999 through April 11, 2000; and (4) shares of PacketPort.com common stock the Eligible Claimant held as of the close of trading on April 11, For more specific information regarding the methodology utilized to determine each Eligible Claimant s distribution (the Approved Claim ), please review the Distribution Plan, which is attached to this Notice as Exhibit A. 8. When will I receive my payment? Processing of the Claim Forms will require significant time. The estimates that distributions from the Disgorgement Fund will be made by summer 2012, although that estimate is subject to change, depending on various factors. Everyone who sends in a Claim Form can receive information about the progress of the Distribution by calling , or sending an to info@packetportdisgorgementfund.com, or writing to:,,,,. 9. Do I give up any legal rights by submitting a claim? By participating in the distribution of the Disgorgement Fund, Eligible Claimants will not be releasing any rights or claims they may have against any party. IF YOU DO NOTHING 10. What happens if I do nothing at all? If you do not submit a Proof of Claim Form, you will not receive any payment in connection with the Distribution, regardless of whether you are otherwise an Eligible Claimant. GETTING MORE INFORMATION 11. Are there more details about the Actions? This Notice summarizes the Distribution. You may obtain copies of the SEC s Order Instituting Cease-and-Desist Proceedings, Final Plan of Distribution and other relevant documents from the s website for free at If you elect to obtain copies from a source other than the free website, there may be a charge for copying and mailing such documents. 12. How do I get more information? You can call toll-free, write to the,, Fund Administrator,,, or send an to info@packetportdisgorgementfund.com to help you determine whether you are an Eligible Claimant and whether you are eligible for payment. SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES If you purchased shares of PacketPort.com common stock from December 13, 1999 through April 11, 2000 as nominee for a beneficial owner, then within ten (10) calendar days after you receive this Notice, you must either: (a) send a copy of this Notice and the accompanying Proof of Claim Form by first class mail to all such beneficial owners; or (b) provide a list of the names and addresses of such beneficial owners to the so that the can provide them with a copy of this Notice and a Proof of Claim Form. If you chose option (a) above, you may request enough forms from the (at no charge) to complete your mailing. You may seek reimbursement of your reasonable expenses actually incurred in complying with these directives, subject to approval of the SEC. All communications concerning this matter should be addressed to the. For More Information: Call Page 4

5 INQUIRIES All inquiries concerning this Notice, the Proof of Claim Form, or any other questions by shareholders should be directed to the as follows: Toll-Free: Dated: March 6, 2012 PLEASE DO NOT CONTACT THE SEC WITH YOUR QUESTONS REGARDING THIS NOTICE. EXHIBIT A PLAN OF DISTRIBUTION The shall determine the net loss amount for each potential Eligible Claimant in three steps, as follows: (a) For each share purchased by a Claimant during the Purchase Period, determine the share loss or gain by calculating the difference, on a first-in, first-out basis, between (1) the purchase price, and (2) the sale price, or, if the Claimant still holds the share, $3.75, and then subtracting the total gains from the total losses; (b) For each share purchased before the Purchase Period and sold during the Purchase Period, determine any artificial gains by calculating the difference, on a first-in, first-out basis, between the purchase price and the sale price; and (c) Subtract the amount calculated in paragraph (b) above from the amount calculated in paragraph (a) above to determine the net loss. The shall determine the pro-rata share of the Disgorgement Fund to be paid to each potential Eligible Claimant as follows: (a) Set aside a reserve sufficient to satisfy tax obligations and fees and expenses of the and the Tax Administrator; (b) Divide the reminder of the Disgorgement Fund (the total Disgorgement Fund less the reserve) by the sum of all potential Eligible Claimant net loss amounts to determine the pro-rata percentage; and (c) Determine each Eligible Claimant s pro-rata share by multiplying his net loss amount by the lesser of the pro-rata percentage or 100 percent. The shall determine, in consultation with Commission staff, whether the funds remaining in the Disgorgement Fund, taking into account unpaid and anticipated expenses, warrant a second distribution. If warranted, a second distribution will follow procedures to be established by the and approved by the Commission staff. Any funds remaining after a second distribution shall be paid to the Commission for transfer to the US Treasury. For More Information: Call Page 5

6 IMPORTANT INFORMATION