Earthlink Chief Signs Agreement
The Associated Press
Saturday, June 2, 2001; 5:32 p.m. EDT LOS ANGELES A co-founder of Internet service provider EarthLink Inc., has signed an agreement with federal regulators who alleged he mismanaged $230 million in investments.
Reed E. Slatkin, 52, of Santa Barbara, did not admit wrongdoing in the consent decree but agreed not to violate federal securities laws in the future, according to U.S. Securities and Exchange Commission documents filed Thursday in federal court.
The SEC alleged that Slatkin defrauded clients while acting as an unregistered investment adviser. Under the agreement, the agency can fine Slatkin and order him to repay investors.
"It's a reflection of Mr. Slatkin's desire to avoid unnecessary expense and litigation and concentrate the parties' efforts on locating and maximizing the value of assets" for investors, said his attorney, Brian Sun.
No charges have been filed against Slatkin, who remains under criminal investigation. He is discussing a plea bargain with the U.S. attorney's office, the Los Angeles Times reported Saturday, citing sources close to the talks. His lawyer declined to comment on the reported talks.
Slatkin invested money for more than 500 people, including fellow members of the Church of Scientology, Internet executives and Hollywood celebrities. Three investors sued him in April, alleging he had failed to return $34 million to them.
Slatkin resigned April 26 from EarthLink's board and on May 1 filed for Chapter 11 bankruptcy protection. Ten days later, the SEC won a court order freezing his assets.
Regulators said that between 1985 and April 2001, Slatkin collected at least $230 million from investors for Swiss securities trading accounts that never existed. He would allegedly use new investor funds to pay interest to earlier investors in a Ponzi-type scheme.
Bankruptcy officials and attorneys for the investors estimate that claims in the case could reach more than $600 million.
© Copyright 2001 The Associated Press