Securities and Exchange Commission (“SEC”)
v. Tel-One, Inc., et al
Frequently Asked Questions (FAQ’s) and
Answers from Soneet R. Kapila, Claims Administrator
(“CA”)
1.
I purchased stock during the relevant
time period (“RTP”) and would be considered an eligible claimant,
does this mean I will be getting a distribution check equal to $1.50 times
the
number of shares I purchased.
A.
No.
A floor price of $1.50 will be utilized by the Claims Administrator
in calculating gains or losses, based on actual purchase price.
If
you bought shares and did not sell them, the CA will calculate the “sale”
price per share utilizing the floor of $1.50. For example, if you purchased 1,000 shares at $3.00 per share
($3,000.00), the calculated “sale” price would be $1,500 or a
loss of $1,500. Your claim will
be based on the total loss calculated either at the floor price of $1.50 or
on actual purchase/sale data.
2.
What is the relevant time period
(“RTP”)?
A.
All persons who purchased stock of Tel One during the
time period of November 27, 2001 through January 22, 2002.
3.
What is a floor price?
A. The Court found and determined
that the closing price of the Tel One stock on the first date after trading
resumed (after January 22, 2002, the closing date in the RTP) was $1.50.
This is defined as the floor price to calculate losses for those investors
who did not sell their stock.
4.
Will I receive my entire investment back?
A.
No. Providing
you have a valid claim, your distribution will be based on your total loss:
¨
Actual loss – If you sold your stock
-- the difference between purchase price and actual sale price.
¨
Calculated loss – If you did not sell
your stock -- the difference between purchase price and the floor price.
5.
How will the amount of the distribution be
calculated?
A.
The Disgorgement Fund will be divided by total amount
of eligible claims (losses) to determine the distribution percentage.
For
instance, IF total eligible claims were $3,000,000 and there was $2,000,000
in the Disgorgement Fund, investors would receive $.67 on the dollar for their
claim (or 67% of their loss). [ILLUSTRATION ONLY]
The
CA does not know at the present time the total funds that will be available
in the Disgorgement Fund for future distribution.
6.
When will I receive my check?
A.
At the present time, the CA does not anticipate distributing
checks until after March 2003.
7.
Do I still own my shares of Teleon (Tel One)
Corporation?
A.
Yes. You
still own your shares if you did not actually sell them.
8.
My loss is $15.00.
Am I considered an eligible claimant?
A.
No. If an
otherwise eligible claim would result in a distribution of less than $25.00,
it is ineligible.
9.
I sold my stock at a gain.
Do I still get a distribution check?
A.
No. If there
is a gain on the sale, the transaction and any resulting claim are ineligible.
10.
Do I need to return the W-9 Form?
A.
Yes. The CA
requests that you complete and return the Form W-9, Request for Taxpayer Identification
Number. If you do not return
Form W-9, any distribution will be subject to Federal income tax withholding,
as required by law.
11.
My investment was an IRA or other type of
retirement account. What do I
do?
A.
You must provide the CA with the name and address of
the custodian of your IRA or other type of retirement account. Your distribution check cannot be sent
directly to you if your account is a retirement account.
12.
My son’s account was set up under the
Uniform Gifts to Minor’s Act and I am the custodian.
Whose social security number should I use?
A.
The social security of the minor child should be used
as the owner of the account.
13.
My broker at the time of the purchase is
no longer my broker. Do I have
to tell you the name and address of my present broker?
A.
If your account is NOT an IRA or other type of retirement
account, the CA does not necessarily need the name of your new broker.
B.
If your account is an IRA or other type of retirement
account, the CA WILL need the name and address of the custodian of the account.
14.
I have moved. Will my check be sent to my new address?
A.
You need to notify the CA of any address changes as
they occur between now and March 2003.
If your name and address are correct on the letter you received from
the CA, you do not need to take any further action.
15.
How will my check be made out?
A.
If your account is an IRA or other type of
retirement account, your check will be made payable to and mailed to the Custodian
of your account.
B.
If your account is not a retirement account,
your check will be made payable and mailed to the name and address as appeared
on your letter.
POST-DISTRIBUTION
FREQUENTLY ASKED QUESTIONS (FAQ's):
16.
Is my distribution taxable?
A. The Claims Administrator strongly suggests you contact your tax advisor for information concerning your tax reporting requirements.
17.
Will I receive a tax form relating to my distribution
check?
A. Yes. All recipients of distribution checks will receive a Form 1099 for 2004. The Forms 1099 for calendar year 2004 will be mailed early in 2005.
18.
Can I sell my Tel-One stock?
A. Yes. The distribution does not preclude you from selling your Tel-One stock. Eligible claimants were included in the distribution whether they had previously sold their Tel-One stock or still held the stock. You should contact your tax advisor for information concerning tax reporting requirements.
19.
Is this a capital gain?
A. Your distribution check represents your pro-rata share of the Disgorgement Fund. Your tax advisor can ascertain the tax reporting requirements relating to the transactional history of your Tel-One stock.
20. I had an IRA account and my check was mailed to my custodian. Is there anything further I need to do?
A. If you provided the name and address of your current IRA custodian as requested by the Claims Administrator, your distribution check was mailed to the custodian. You will receive Form 1099-Misc. for 2004.
21.
I had an IRA account. Why was my check was mailed directly to me?
A. If you did not provide the name and address of your current IRA custodian to the Claims Administrator, the distribution check was made payable to you and, if required, income tax was withheld per IRS regulations. You will receive Form 1099-R for 2004. Please consult your tax advisor for tax reporting requirements.
22.
My account was a regular account, not a retirement
account. I received a distribution
check. What do I need to do?
A. You will receive Form 1099-Misc. for 2004. Please consult your tax advisor for tax reporting requirements.
23.
I calculated my loss based on the floor price of $1.50
but my check was for less. Why?
A. Claimants who did not provide the Claims Administrator a completed Form W-9 and/or a taxpayer identification number or did not provide custodian information relating to retirement-type accounts were subject to income tax withholding pursuant to applicable federal income tax laws. If you received a payment, net of federal income tax withholding, your 2004 Form 1099 will report such withholding.
24.
What was the tax withholding percentage?
A. For individuals who failed to provide a tax identification or social security number, the withholding percentage was 31% reported on Form 1099-Misc. For individuals who failed to provide the custodian name and address relating to their retirement account, the withholding percentage is 10% reported on Form 1099-R.
25. Will there be any more distributions?
A. Per Court Order, all monies in the Disgorgement Fund were distributed to the eligible investors, less holdbacks for administrative costs, professional fees and reserved claims.
25.
I moved and haven't received a distribution check.
A. The distribution checks were mailed to an investor's last known address. If a distribution check is returned to the Claims Administrator by the post office with a forwarding address, the check is being forwarded to the new address. If the post office does not provide a forwarding address, the Claims Administrator will attempt to identify/locate the claimant's new address. If a valid address cannot be determined, the distribution check will be voided and the funds ultimately returned to the SEC. Please inform the CA by email (telone@kapilaco.com) or by mail of your new address.
26.
How do I report this on my tax return?
A. You should consult your tax advisor for information concerning tax reporting requirements.