SEC charges Net tutor duped investors
Online tutoring service Tutornet.com misled investors about the ailing state of its financial affairs, the Securities and Exchange Commission alleges.
Chantilly, Va.-based Tutornet.com is accused of violating securities laws by making "false and misleading statements" on four separate occasions, according to the SEC.
Calls to the company were met with a message saying the company's phone has temporarily been disconnected. Tutornet's attorneys did not return phone calls.
The SEC lawsuit, filed yesterday, alleges that the struggling Tutornet inflated reports of its financial health to "lull current prospective investors into a false sense of security."
Tutornet is a service that offers to link students with tutors over the Web. For the past three months, though, former employees, most of whom are tutors, have posted complaints on several message boards accusing Tutornet of stiffing them on their wages. One former tutor created a Web site to host some of the complaints.
Among the SEC's other charges are that Tutornet said in SEC documents filed May 18 that the company was engaged in a co-marketing deal with America Online.
"What the company failed to tell investors was that AOL had terminated the contract in April," said Ron Long, the SEC's Philadelphia district administrator.
Long said AOL cut ties after Tutornet failed to "meet the financial terms of the deal."
Other SEC claims are that Tutornet chief executive Euburn Forde told investors this year that the company received a $30 million investment from Princeton Investments, a Bahamian company the SEC could find no proof existed. Forde also allegedly told investors that Tutornet landed a lucrative contract with Housing and Urban Development (HUD) and that future contracts with the agency were on the horizon.
Tutornet did the work for free, and HUD had no money for future contracts, according to the SEC.
If found guilty, Tutornet and Forde could face up to $100,000 in fines for each of the four charges, Long said.