Psychic Friends Network Owners Settle SEC Fraud Charges
The SEC said officials of Regal Communications inflated the company's worth to defraud investors in the early 1990s, when Regal bought the infomercial firm that ran the Psychic Friends phone service and two other companies owned by celebrity Joan Rivers.
As part of the settlement, which was filed Friday, the SEC ordered the executives to pay back "ill-gotten gains," amounting to $2.21 million, which the SEC said the men got from selling Regal stock, though the payments were deemed satisfied by restitution ordered in the criminal action and/or waived based on financial condition.
The SEC also barred two executives -- former president/CEO Arthur L. Toll and former CFO Bruce B. Edmondson -- from ever serving as officers of any public company. Elliot S. Fisher, Regal's former in-house lawyer, was barred from representing companies before the SEC.
The SEC filed a complaint against the men in May 1998, alleging they violated federal securities laws, but delayed action pending the simultaneous criminal investigation. Prosecutors said Toll participated in a conspiracy to report millions of dollars in bogus revenue and accounts receivable in Regal's financial statements and to divert Regal stock worth millions of dollars to himself.
The executives were not required to admit wrongdoing as part of the SEC settlement, but Toll pleaded guilty to securities fraud, mail fraud and other charges in 1999 and was sentenced to four years in prison. Edmondson pleaded guilty to similar charges and was sentenced to three years in prison. Fisher pleaded guilty to conspiracy and was sentenced to six months in jail. Former Regal board member Gerald Levinson pleaded guilty to filing a false income tax return and was sentenced to probation.
Among the investors in Regal was celebrity Joan Rivers, whose company, Joan Rivers Products, merged with Regal in a stock swap deal.
Toll, who once appeared on the cover of Inc. magazine as an attention-grabbing entrepreneur, was the majority owner of Regal Communications, Fort Washington, PA, which owned two major subsidiaries. Regalfone Inc. was the operator of pay-per-call "900" services that included sex talk, psychic and horoscope programs. Regal Group marketed products through infomercials.
The companies filed for bankruptcy Sept. 23, 1994, after auditor discoveries of financial irregularities that delayed its fiscal reports and triggered a federal investigation.