Scientology's Reed Slatkin

Earthlink co-founder signs decree over alleged investment scheme

Saturday, June 2, 2001 http://www.siliconvalley.com/docs/news/svfront/033754.htm

LOS ANGELES (AP) -- Reed E. Slatkin, co-founder of Internet service provider EarthLink, has signed a consent decree with federal regulators who claimed he mismanaged $230 million invested for Hollywood celebrities and others.

Slatkin, 52, of Santa Barbara, did not admit wrongdoing in the 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.

"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.

The SEC alleged that Slatkin defrauded clients while acting as an unregistered investment adviser. The consent decree allows the agency to fine Slatkin and order him to repay investors.

Slatkin also remains under criminal investigation. Although no charges have been filed, 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, the Times said.

Slatkin invested money for more than 500 people, including fellow members of the Church of Scientology, Internet executives and Hollywood celebrities. Three of those 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 he 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.


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