Startup cable overbuilder Carolina BroadBand Inc. said it will move ahead with plans to offer video, voice and data services in the Raleigh, N.C., area, despite the resignation of its president, which resulted from insider-trading charges.
Carolina BroadBand president and co-founder Joseph Webster resigned Sept. 21, after he agreed to pay more than $30,000 to resolve Securities and Exchange Commission charges that he profited from a deal involving his former company, Dutch telecommunications provider Priority Telecom, back in January.
Webster, who was named Carolina BroadBand president in May, neither admitted nor denied he profited from an insider-trading deal that stemmed from a $300 million investment from Microsoft Corp. in Priority Telecom's parent company, Denver-based UnitedGlobalCom Inc., the SEC disclosed in a judgment order posted on its Web site.
But Webster agreed to pay $15,321-the amount of his alleged profit from the transaction-and an equal amount in fines.
The SEC claimed that while Webster was president of Priority in January 1999, he purchased 1,441 shares of UGC, after he learned that Microsoft would invest in the initial public offering of United Pan-European Communications, a UGC subsidiary.
Webster bought the shares in UGC on Jan. 25, prior to UGC's announcement the Microsoft deal, and sold them two days later for a profit.
Carolina BroadBand said it had no prior knowledge of the insider deal and only learned of the SEC investigation after the judgment was entered.
Prior to his stint at Priority Telecom, Webster was a regional manager for Time Warner Telecom Inc. in the Raleigh area.
Carolina BroadBand CEO William Schuler will assume some of Webster's duties; in the interim, various vice presidents at the company will handle other duties.
"While the development regarding Mr. Webster is unexpected, it will not deter our company and its strong leadership from driving forward with the mission of bringing the benefits of broadband technology and choice in cable television and telecommunications services to millions of residents in the Carolinas," Schuler said in a prepared statement.
Carolina BroadBand faces some stiff competition from Time Warner Cable, which has the majority of cable subscribers in the Raleigh area, and BTI, another overbuilder that plans to bring broadband service to North Raleigh next year.
Carolina BroadBand last week said it obtained a franchise to wire Charlotte for voice, video and data services. Carolina has a franchise for Raleigh and plans cable projects in Durham, Greensboro and Winston-Salem. Construction in Charlotte is to begin in the next 12 months.
In May, Carolina BroadBand received $402 million in equity financing from First Union Capital Partners, Bank of America Capital Investors and Carousel Capital Partners, to help build its network in the Carolinas. The company plans to begin offering service in some parts of Raleigh by next year.
Carousel Capital managing director Nelson Schwab said in a prepared statement that Carolina BroadBand took the appropriate action, adding, "We have full faith and confidence in the company's management team and its ability to implement its business plan."