BUISNESS C12V_20_1 BUS LAW - CASE ANALYSIS 3

Securities and Exchange Commission v. Edwards 1 C12 - Business Law Case Analysis 3 Securities and Exchange Commission v. Edwards Summarize the facts of the case Charles Edwards ran the company ETS Payphones Inc. in multiple roles such as the Chief Operating Officer, chair of the board and sole shareholder. ETS Payphones Inc. sold payphones to the general public while partially acting through subsidiary, which also happens to be controlled by Edwards. ETS offered customers a package with a total cost of US$7,000 including various agreements such as a site lease, a five-year leaseback and management agreement and a buyback agreement. The company promises that each purchaser will receive 14% of their annual return monthly, which equates to $82 per month with an additional promise of a refund on the full price of the purchase. The return is in accordance with the leaseback and management agreement. The refund would be sent to the purchaser once the lease had ended or could also be returned up to 180 after the initial request of the purchaser. The company made claims in their advertising “[v]ery few business opportunities can offer the potential for ongoing revenue generation that is available in today's pay telephone industry.”(Bagley, C. E. Managers and the Legal Environment: Strategies for Business.) Even with their clever marketing claims and impressive refund offer, ETS were not making the income they anticipated which put them in a difficult position, one that did not allow them to have enough money to pay the refund they promised to the purchasers. In order to meet this claim to purchasers, ETS had to resort to using the money received from new investors to pay its outstanding obligations rather than having it contribute to profit. After facing such financial problems, ETS was forced to file for bankruptcy