The Massachusetts secretary of state has ordered American National Cellular Inc. of Los Angeles to stop promoting mobile-telephone investments in the state.
The state official accused the company of violating state securities laws and issued a cease-and-desist order against American National Cellular, its chairman, Earl Serap, and TV personality Mike Douglas, spokesman for the company in TV commercials and newspaper advertising.
American National Cellular sells application services to investors seeking a license from the Federal Communications Commission to build and operate a cellular mobile phone system. Cellular mobile phones use networks of computer-controlled two-way radios to route calls to car and portable telephones.
Last summer, the FCC urged investors "to beware of potentially misleading or fraudulent claims by marketers of cellular mobile radio franchise applications." The FCC asked the Federal Trade Commission, the Securities and Exchange Commission, the Internal Revenue Service and all 50 state securities regulation agencies to investigate promoters of cellular investments.
Massachusetts is the second state to move against American National Cellular. The complaint accuses the company of "using deceptive promotional practices and misrepresenting the risks involved, the likely amount and time frame of investment return and the ease of obtaining a cellular communications license," said Lee Regan, spokeswoman for the secretary of state, Michael J. Conolly. The order also applies to Gateway Capital Inc., a San Diego company that represents American National Cellular, and two Gateway employes.
Mike Douglas was not available for comment. "We deny all of it," said American National Cellular's general counsel, Daniel Raiskin. "The company spent a lot of time and money and lawyers making sure that what they do is completely legitimate and honest, and if we have to defend that position in Massachusetts, we will do so."
Last summer, the Arizona Corporation Commission filed a civil suit against the company, alleging violations of the state's securities laws and "misrepresentation and omission of material fact about FCC rules, the profitability of the license, and the likelihood of success," said Michael Salcido, staff attorney for the securities division. ANC's Raiskin called those allegations "unsubstantiated" and said the company "will win" the case.
The FCC did not name specific companies when it issued its unprecedented warning to potential investors. Agency officials say they are concerned that many investors may not understand how difficult it is to win a license.
The agency awards only two cellular phone licenses in each city and automatically gives one to the local phone company. In recent months, the FCC has been flooded with more than 5,000 applications for licenses in 30 cities where licenses will be awarded by lottery later this year.