The chairman and chief executive of U.S. Technologies Inc. spent as much as $20,000 a month of his own money for the past six months to keep the company afloat until the Securities and Exchange Commission, worried that he was draining assets that might be used to repay bilked investors, persuaded a federal judge to freeze both his and the company's accounts.
C. Gregory Earls, 57, who faces civil charges of misappropriating $13.8 million and criminal charges of securities, mail and wire fraud, can tell a federal judge March 25 why the temporary restraining order freezing those assets should be lifted. But the spending contradicted the authorities' belief that neither Earls nor the company had substantial assets, said David L. Kornblau, chief litigation counsel of the SEC's enforcement division.
Earls's attorney told the SEC that Washington-based U.S. Technologies expects a "significant payment" from a pending transaction that could close in four weeks, Kornblau said. But the company, which is an incubator for Internet start-ups, would not say with whom it made the deal or how big it is, Kornblau said.
"Having stolen millions of dollars of funds from [U.S. Technologies] investors, Earls should not be permitted to squander assets that should be preserved for his victims," Kornblau said in the SEC's complaint. "We do not know where Earls is obtaining the funds to make these payments."
Earls said last night that he put his own money into U.S. Technologies to protect its assets.
"I have been the sole support of the company since the intervention of the government," Earls said. "I haven't taken a salary since last spring."
He added that he and his lawyer had approached eight of the major shareholders who represent 70 percent of the company's shares to gauge their interest in a plan to establish a trust to liquidate the company. He said he was willing to be last in line to recover any money.
"They wanted to see the accounting and the fine print, but it seemed like a viable concept. Almost everybody thought so," Earls said.
It was only after his lawyers told the SEC of those plans that the agency asked a federal judge to freeze Earls's and the company's assets.
Earls's attorney, Thomas Green, did not return calls, and Earls refused to comment on the charges he faces. In previous interviews Earls has denied wrongdoing. The lawyer who represents the company, Barry Coburn, declined to comment.
The SEC is asking the court to appoint a corporate monitor to oversee any financial transactions, a request that Earls said he was going to make himself.
Federal prosecutors in New York have until March 20 to seek an indictment on the criminal charges, but they could ask a judge for an extension. A spokesman for the U.S. attorney's office declined to comment. Except for asking that the assets be frozen, the SEC's civil case is largely on hold until the criminal case is over, Kornblau said.
U.S. Technologies once attracted millions of dollars from investors and an all-star board of directors, but now consists mostly of Earls and support staff, Kornblau said. It has not filed the SEC documents required of public companies in nearly a year. Its shares trade at 1 cent on the OTC Bulletin Board.