UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 40281 / July 30, 1998 ADMINISTRATIVE PROCEEDING File No. 3-9661 In the Matter of: : ORDER INSTITUTING PUBLIC : CEASE-AND-DESIST PROCEEDING, Incomnet, Inc., : MAKING FINDINGS AND ISSUING Joel W. Greenberg, and : A CEASE-AND-DESIST ORDER Stephen A. Caswell, : AGAINST INCOMNET, INC., : JOEL W. GREENBERG, AND : STEPHEN A. CASWELL Respondents. : : . The Securities and Exchange Commission (the "Commission") deems it appropriate that a public cease-and- desist proceeding be instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Incomnet, Inc. ("Incomnet"), Joel W. Greenberg ("Greenberg"), and Stephen A. Caswell ("Caswell"). Accordingly, IT IS HEREBY ORDERED that a cease-and- desist proceeding against Incomnet, Greenberg, and Caswell be, and hereby is, instituted. II. In anticipation of the institution of this proceeding, Incomnet, Greenberg, and Caswell have submitted offers of settlement ("Offers"), which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings contained herein except that Incomnet, Greenberg, and Caswell admit the jurisdiction of the Commission over them and over the subject matter of this proceeding, Incomnet, Greenberg, and Caswell consent to the issuance of this Order Instituting Public Cease-and-Desist Proceeding, Making Findings and Issuing a Cease-and-Desist Order ("Order"). *I. On the basis of this Order and the Offers, the Commission makes the following findings:[1]/ A. Incomnet, Inc., is headquartered in Woodland Hills, California, and incorporated in California. Incomnet's common stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act and trades on the NASDAQ Small Cap Market. Incomnet derives the majority of its revenue from its main subsidiary, National Telephone Communications, Inc. ("NTC"). NTC sells marketing materials to independent sales representatives who in turn, on behalf of NTC, sell discounted long distance telephone service. B. Joel W. Greenberg ("Greenberg), 60, resides in Chicago, Illinois, and was a director of Incomnet from 1988 to May 1996, and Incomnet's Chairman of the Board from approximately October 26, 1995 to May 9, 1996. C. Stephen A. Caswell ("Caswell"), 49, resides in Simi Valley, California, and was a director of Incomnet from April 1988 until November 15, 1995, when he resigned as a director. Caswell has been Vice President and Corporate Secretary of Incomnet from approximately August 1989 to the present. D. From approximately January 1988 until November 30, 1995, one individual was Incomnet's chief executive officer, president, and chief financial officer (hereinafter referred to as "Incomnet's Former CEO"). Incomnet's Former CEO stepped down as Incomnet's Chairman of the Board in approximately late October 1995, but remained on the Board until November 30, 1995. E. Incomnet's Former CEO's spouse ("Incomnet's Former Outside Director") served as one of Incomnet's outside directors from approximately 1988 to November 15, 1995, when she resigned. Incomnet's Former CEO and Incomnet's Former Outside Director, were at all applicable times, and still are, married. F. Kaliber Management ("Kaliber") is an inactive privately held California corporation owned by Incomnet's Former CEO and Incomnet's Former Outside Director. Incomnet's Former CEO used a brokerage account in Kaliber Management's name (the "Kaliber Account") to buy and sell Incomnet securities. Incomnet's BuyBack Program G. On August 5, 1994, Incomnet publicly announced that it had instituted a stock repurchase program (the "BuyBack Program"), to repurchase up to 1,000,000 shares of Incomnet common stock. According to Incomnet's July 27, 1994 Board Minutes, its Board of Directors determined that "the acquisition of shares in the open market and in private transactions to be in shareholder's [sic] best interest due to extraordinary events which may have acted to depress the price of the shares." Incomnet's Board resolved that "the officers and directors proceed with the appropriate activity to purchase from time to time in the open market and in private transactions the shares of Incomnet, Inc. in the amount not to exceed 1,000,000 shares" and resolved that "the Chairman be authorized to secure additional financing if required from various sources to effect the purchase of the shares as according to the aforementioned authorization." According to Incomnet's filings with the Commission, Incomnet purchased 486,000 shares pursuant to its BuyBack Program, the majority of which shares Incomnet has retired. Incomnet's Former CEO's Undisclosed Trading of Incomnet Securities in the Kaliber Account H. From approximately June 1994 through July 1995, Incomnet's Former CEO bought over a total of 1,100,000 Incomnet shares on at least 48 occasions and sold over a total of 900,000 Incomnet shares on at least 28 occasions in his Kaliber Account in what Incomnet's Former CEO described as an attempt to defend Incomnet's share price against short sellers. With the exception of one purchase of 100,000 shares, Incomnet's Former CEO failed to disclose his trading in the Kaliber Account, as he was required to under the federal securities laws. Incomnet's August 1995 Form 8-K I. On August 28, 1995, Incomnet filed a Form 8-K, signed by Incomnet's Former CEO, which stated that Incomnet's Former CEO had executed an Irrevocable Tender of Payment ("ITP"). The ITP was included as an exhibit to the Form 8-K, and was signed by Incomnet's Former CEO, Greenberg, Caswell, and Incomnet's Former Outside Director. According to the ITP, Incomnet's Former CEO tendered to Incomnet short swing profits earned and losses avoided by Kaliber (for the trading referenced in H above) to comply with Section 16(b) of the Exchange Act, and consistent with prior representations to and written agreements between Incomnet's Former CEO and Incomnet's Board of Directors. According to the ITP, Incomnet's Former CEO, with the unanimous written consent of Incomnet's Board, established a special brokerage account in the name of Kaliber Management (the "Defense Fund") to defend Incomnet's stock price from short sellers. The ITP states that in the absence of the Defense Fund and Incomnet's Former CEO's purchases and sales of Incomnet stock in the public trading market, the short sellers may have "broken the price" (caused Incomnet's stock price to decrease) and severely damaged Incomnet by eliminating its ability to raise capital and operate effectively. J. At least one representation in the ITP (which, as discussed in I above, was attached to Incomnet's August 1995 Form 8-K) was false. Incomnet's Board never authorized Incomnet's Former CEO to establish a special brokerage account in the name of Kaliber Management Corporation (the "Kaliber Account") to purchase shares pursuant to the BuyBack Plan to defend Incomnet's share price against short sellers. Moreover, Incomnet's Former CEO never told the Board members, prior to their signing the ITP, that he purchased and sold Incomnet shares in the Kaliber Account pursuant to the BuyBack Program or that he utilized the Kaliber Account to defend Incomnet's share price. K. All of Incomnet's Board members read and reviewed the ITP before signing it. At the time they signed the ITP, Greenberg, Caswell, and Incomnet's Former Outside Director all knew that the ITP contained false statements. Greenberg, Caswell, and Incomnet's Former Outside Director never inquired as to why they were asked to sign the ITP or how the ITP would be used. Incomnet's Additional Public Statements Regarding Its August 1995 Form 8-K L. On September 6, 1995, Incomnet issued a press release, which stated that the Kaliber transactions were disclosed to and approved by Incomnet's Board of Directors. The press release also stated that the Incomnet stock purchases (in the Kaliber Account) were effected pursuant to the limitations of Rule 10b-18 promulgated under the Exchange Act and that sales of stock were made solely to maintain sufficient liquidity to permit additional stabilizing purchases under Rule 10b-18.2[2]/ M. On November 14, 1995, Incomnet filed a Form 10-Q with the Commission, which referenced Incomnet's false August 1995 Form 8-K. N. Incomnet filed a Form 8-K on December 14, 1995, which, among other things, stated that "as clarification of Incomnet's Form 8-K filed on August 18[sic], 1995, while the Chairman's general investment commitment and belief in the Company's stock was known by members of the Board, knowledge of specific purchases and sales of the Company's stock by Kaliber was first made available to Board members during discussions relating to the ITP." Thus, Incomnet issued false statements regarding the August 1995 Form 8-K (that the Board knew of and had approved of Incomnet's Former CEO's establishing the Kaliber Account to purchase Incomnet securities to defend the market for Incomnet securities) for approximately three and one-half months. Incomnet's Share Price Decreased Almost 40% Once Incomnet's Former CEO's Trading in the Kaliber Account Was Disclosed to the Public O. Incomnet filed the Form 8-K regarding Incomnet's Former CEO's trading on August 28, 1995, which became available to the public shortly thereafter. On September 1, 1995, Incomnet's shares opened for trading on NASDAQ at $15.37 a share. From September 1 through September 7, several news articles were published regarding Incomnet's Former CEO's trades in the Kaliber Account and Incomnet's August 1995 Form 8-K. On September 7, Incomnet's shares closed at $9.25, down a total of $6.10 (or almost 40%) since Incomnet's Former CEO's trading in his Kaliber Account became public. NASDAQ Proceedings P. Shortly after Incomnet filed its August 1995 Form 8-K, NASDAQ informed Incomnet that based upon its review of Incomnet's Form 8-K, Incomnet's Former CEO's actions, which (according to the ITP) were approved by the Company's Board, were contrary to just and equitable principles of trade, and in detriment of the public interest and the NASDAQ Small Cap Market's mission to preserve and strengthen the quality of and public confidence in its market. As such, NASDAQ informed Incomnet that it was subject to delisting from the Small Cap Market. Incomnet's September 15, 1995, Board of Director's Meeting Minutes (which all Incomnet's Board members attended) stated that Incomnet received a letter from NASDAQ stating that Incomnet could be delisted because of a recent Form 8-K it filed detailing stock purchases and sales. Q. On October 26, 1995, NASDAQ ruled in favor of delisting Incomnet stock (subject to a 45 day stay). NASDAQ determined that "Incomnet's Former CEO's buying and selling activity in Incomnet's stock was clearly an attempt to influence the market, which in its opinion was inappropriate and potentially manipulative." NASDAQ stated that "the market should determine the value of the stock and an attempt by Incomnet to control the market and thereby set a price is unjustified." On November 22, 1995, upon conclusion of the 45 day stay, NASDAQ determined not to reverse the decision to delist Incomnet's securities, but stayed the delisting for at least another 45 days. "NASDAQ remained convinced that the trading activity in the company's stock, as conducted by Incomnet's Former CEO, was inappropriate and potentially manipulative." NASDAQ rejected Incomnet's characterization of the trading activity and related disclosures as a mistake, based on the backgrounds of Incomnet's Former CEO and Greenberg. NASDAQ again concluded that Incomnet's actions were not consistent with just and equitable principles of trade. Incomnet's Reconstitution of Its Board of Directors R. On November 15, 1995, Caswell and Incomnet's Former Outside Director resigned from Incomnet's Board, Incomnet's Former CEO resigned as Chairman, and three new members were appointed to the Board. Greenberg acted as Incomnet's Chairman of the Board from approximately late October 1995 to November 15, 1995, when the Board adopted a resolution for him to become Chairman. Additionally, the Board established a policy that all Board members and senior officers must receive permission before purchasing Incomnet securities. On November 30, 1995, Incomnet's Former CEO resigned from Incomnet's Board and all other positions he held with Incomnet. Shortly thereafter, NASDAQ informed Incomnet that it would not delist Incomnet from the Small Cap Market. Incomnet's Denial of the SEC Investigation in Two Press Releases S. Incomnet requested and received a copy of the Commission's formal order of investigation in September 1994. On January 17 and 18, 1995, the cable television channel CNBC reported that the SEC was investigating Incomnet. On January 17, 1995, Incomnet issued a press release, which, among other things, stated that "it is categorically false that the Company is under a major investigation by the SEC or any other regulatory body for 'unfair and unethical sales practices' as reported on CNBC by Dan Dorfman." On January 18, 1995, Incomnet issued another press release, which, among other things, stated that "it is incorrect that the Company is under a major investigation by the Securities and Exchange Commission ("SEC") or any other regulatory body for unsavory, unethical, or unfair sales practices, as reported on CNBC by Dan Dorfman." Finally, on January 19, 1995, Incomnet issued a press release, which correctly stated that "[t]here is an investigation being carried on by the Securities & Exchange Commission." Incomnet's January 17, 1995, press release was drafted by Incomnet's Former CEO with the help of Caswell and Incomnet's Former Outside Director. Subsequent press releases regarding the Commission's investigation were drafted by Incomnet's Former CEO and Caswell. Incomnet's directors were aware of these press releases prior to their issuance or shortly thereafter and knew that the press releases were materially misleading. Shortly after Incomnet issued the January 1995, press releases, Incomnet's directors, in order to ensure that Incomnet's public statements and filings were complete and accurate, required that corporate counsel review Incomnet's public statements and SEC filings prior to their release. The Board did not take any other action to establish other safeguards or procedures to protect against such future events. Greenberg's Loan Agreement T. In January 1995, Greenberg entered into a loan agreement, whereby he borrowed $1.8 million dollars for a period of one year at an annual interest rate of 8% to be paid monthly. Greenberg collateralized the loan with 513,167 Incomnet shares to be held until full payment of the loan. If Incomnet's stock price dropped below $5 per share, then Greenberg would have to provide additional collateral. Greenberg never filed an amended Schedule 13D to reflect the loan arrangement he entered into nor did he ever make any monthly payments on or fully repay this loan. Incomnet Violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-11, and 13a-13 Thereunder by Filing a False Form 8-K and Misleading Form 10-Q U. Section 13(a) of the Exchange Act and Rules 13a-11 and 13a-13 thereunder require issuers whose securities are registered with the Commission pursuant to Section 12 of the Exchange Act to file current (Form 8-K) and quarterly (Form 10-Q) reports with the Commission. Under Section 13(a), all information in the reports must be accurate. See SEC v. Savoy Industries, Inc., 587 F.2d 1149, 1165 (D.C. Cir. 1978), cert. denied, 440 U.S. 913 (1979). Additionally, Rule 12b-20 requires that reports filed with the Commission contain, in addition to the information expressly required to be included in a statement or report, such other information as is necessary to assure that the statements made are not, under the circumstances in which they were made, materially misleading. No showing of scienter is required to establish a Section 13(a) violation. Savoy Indus., 587 F.2d at 1167. V. Incomnet violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-11, and 13a-13 thereunder by making materially false statements in current and periodic filings. First, Incomnet filed a Form 8-K with the Commission on August 28, 1995, which among other things, falsely stated that Incomnet's Former CEO received unanimous written authorization from Incomnet's Board to establish the Kaliber Account to defend Incomnet's stock price from short sellers. Additionally, Incomnet's November 14, 1995, Form 10-Q referenced Incomnet's false August 1995 Form 8-K. Incomnet Violated Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder by Filing a False Form 8-K and a Misleading Form 10-Q, and Issuing False Press Releases W. Section 10(b) of the Exchange Act and Rule 10b-5 thereunder make it unlawful for any person in connection with the purchase or sale of any security, to make untrue statements of material fact, omit to state material facts, use any device, scheme or artifice to defraud, or engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person. The "in connection with" requirement of Section 10(b) may be satisfied with a showing that the defendant's acts resulted in the issuer making a public announcement or filing a report with the Commission that could reasonably be expected to cause investors to trade in the issuer's securities. See SEC v. Savoy Indus., Inc., 587 F.2d at 1171; SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 860-61 (2d Cir. 1968), cert. denied, 394 U.S. 976 (1969). Rule 10b-5 is violated whenever assertions are made in a manner reasonably calculated to influence the investing public, if such assertions are false or misleading or are so incomplete as to mislead. SEC v. Texas Gulf Sulphur, Co. 401 F.2d at 862. Misstatements may be violative even though there is no contemporaneous trading in the company's securities by insiders or the corporation. Heit v. Weitzen, 402 F.2d 909, 913 (2d Cir. 1968), cert. denied, 395 U.S. 903 (1969). X. Incomnet violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by publicly disseminating false and misleading statements (that Incomnet's Board had previously given written authorization for Incomnet's Former CEO to establish the Kaliber Account to purchase Incomnet securities, pursuant to the BuyBack Program, to defend Incomnet's share price against short sellers) in filings with the Commission on Form 8-K and Form 10-Q, coupled with public trading in Incomnet securities. Additionally, Incomnet: 1) issued two press releases (one on January 17, 1995, and the other on January 18, 1995) that essentially denied the Commission's investigation; and 2) on September 6, 1995, issued a press release, which referenced and repeated some of the false statements contained in Incomnet's August 1995 Form 8-K. Y. Incomnet's Former CEO acted with scienter.3[3]/ Incomnet's Former CEO knew statements contained in Incomnet's August 1995 Form 8-K were false, yet he still signed the Form 8-K and caused it to be filed with the Commission in an attempt to explain his undisclosed trading. Moreover, Incomnet's Former CEO helped draft and issue Incomnet's January 1995 press releases that essentially denied the existence of the Commission's investigation. Further, Incomnet's Former CEO signed Incomnet's November 1995 Form 10-Q, which referenced Incomnet's false August 1995 Form 8-K. Z. Reasonable investors would consider Incomnet's statements in its Form 8-K (and later referenced in its September 1995 press release and November 1995 Form 10-Q) as described in I-J & L-N and in its January 1995 press releases as described in S, material in making an investment decision. Moreover, shortly after Incomnet filed the August 1995 Form 8-K, the price of Incomnet's shares decreased almost 40%. See SEC v. Lund, 570 F. Supp. 1397, 1401 (C.D. Cal. 1983) (rapid change in stock price following disclosure of nonpublic earnings information showed that the information was material). Further, NASDAQ determined to delist Incomnet based on statements included in Incomnet's false Form 8-K.4[4]/ Caswell and Greenberg Caused Incomnet's Violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b- 5, 12b-20, and 13a-11 Thereunder Relating to Incomnet's August 1995 Form 8-K AA. Under Section 21C of the Exchange Act, the Commission, upon finding that a violation of a provision of the Exchange Act has occurred, can order a person who was a cause of the violation to cease and desist from causing the violation and any future violation. The Commission must prove that the person knew or should have known that such person's inaction would contribute to the violation. In the Matter of Carole L. Haynes, 60 S.E.C. Docket 2294, 2341 (Nov. 24, 1995) ("should have known" language in Section 21C sets forth negligence standard). BB. When information comes to the attention of directors indicating that the corporation's management may have engaged in fraud or that the corporation's prior public statements may be inaccurate, corporate directors have a duty under the federal securities laws to oversee the corporation's financial reporting process and to ensure the integrity and completeness of public statements made by the corporation. See Report of Investigation in the Matter of the Cooper Companies, Inc. as it Relates to the Conduct of Cooper's Board of Directors, Exchange Act Rel. No. 34-35082 (Dec. 12, 1994); Report of Investigation in the Matter of National Telephone Co., Exchange Act Rel. No. 34-14380 (Jan. 16, 1978). To fulfill this duty, outside directors must maintain a general familiarity with the corporation's public disclosures and accounting practices and investigate "red flags" that come to their attention indicating that the corporation's public disclosures may be false or misleading. See National Telephone Co., Exchange Act Rel. No. 34-14380 (Jan. 16, 1978); Report of the Investigation in the Matter of Stirling Homex Corp., Exchange Act Rel. No. 34-11516 (July 2, 1975). As a result, outside directors cannot blindly rely on management to make all disclosure decisions. See National Telephone Co., Inc., Exchange Act Rel. No. 34- 14380 (Jan. 16, 1978). CC. Greenberg and Caswell circumvented their own procedures for ensuring the accuracy of public statements by signing the ITP (a document they knew contained false statements), without informing counsel of the false information the ITP contained; thus, rendering the procedures they had established to ensure the accuracy of Incomnet's public statements ineffective. Further, Incomnet's directors never asked why they were asked to sign the ITP or how the ITP would be used, despite knowing that the ITP concerned Incomnet's Former CEO's short swing profits. Incomnet's directors knew or should have known that Incomnet's Former CEO's disgorgement of short swing profits, which covered approximately 13 months of undisclosed trading, could lead Incomnet to file a Form 8-K regarding such disgorgement. DD. Caswell and Greenberg by signing a corporate document which they knew was false made the procedures they had instituted to ensure the accuracy of Incomnet's public statements ineffective. As such, Caswell's and Greenberg's failure to take any action to ensure the accuracy of Incomnet's public statements caused Incomnet to violate Sections 10(b) and 13(a) of the Exchange Act and Rules 10b- 5, 12b-20, and 13a-11 thereunder when it filed the August 1995 Form 8-K. Caswell and Greenberg Caused Incomnet's Violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b- 5, 12b-20, and 13a-13 Thereunder Relating to Incomnet's September 1995 Press Release and its November 1995 Form 10-Q EE. Incomnet's Former CEO, Greenberg, Caswell, and Incomnet's Former Outside Director were all present at the September 15, 1995, Board of Directors Meeting where the directors discussed a letter Incomnet received from the NASD stating that Incomnet could be delisted because of a recent Form 8-K it filed, yet they failed to take any action to ensure the accuracy and completeness of Incomnet's public statements until mid-December 1995. FF. Greenberg and Caswell were a cause of Incomnet's violations of the antifraud and reporting provisions of the federal securities laws because they failed to take any: 1) action to ensure that Incomnet's September 6, 1995 press release and Incomnet's Form 10-Q filed on November 14, 1995, were accurate and complete; and 2) effective measures to ensure the accuracy of Incomnet's public statements. As such, Greenberg and Caswell caused Incomnet to issue the September 1995 press release and thereby violate Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and to file the November 1995 Form 10-Q and thereby violate Section 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 12b-20, and 13a-13 thereunder. Greenberg's Failure to File an Amended Schedule 13D Regarding His Loan Agreement Violated Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 Thereunder GG. Section 13(d)(1) of the Exchange Act provides that any person who acquires the direct or indirect beneficial ownership of more than 5% of a class of registered equity securities must file with the Commission, within ten days, a statement containing certain information. Rule 13d-1(a) requires, among other things, that these disclosures be made on Schedule 13D. Item 6 of Schedule 13D requires an individual filing a Schedule 13D to, among other things, describe any contract, arrangements, undertakings or relationships with respect to any transfer of such securities. Rule 13d-2 requires that an amendment be filed promptly to reflect any material change in the facts set forth in a Schedule 13D, including the acquisition or disposition of beneficial ownership of 1% or more of a class of securities. To be prompt, an amendment must be filed "as soon as practicable" under the facts and circumstances of the case. In the Matter of Cooper Laboratories, Inc., Exchange Act Release No. 22171 (June 26, 1985), [1984-85] Fed. Sec. L. Rep. (CCH)  83,788 at 87,526-27. "Any delay beyond the time an amendment could reasonably have been filed may not be deemed to be prompt." Id. at 87,526. HH. Under Section 13(d)(1)(E) of the Exchange Act, Greenberg was required to disclose the loan arrangement he entered into in January 1995 whereby he used 513,167 Incomnet securities as collateral. By failing to file an amended Schedule 13D regarding this loan, Greenberg violated Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 thereunder. IV. Based on the foregoing, the Commission finds that: A. Incomnet violated Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 12b-20, 13a-11, and 13a-13 thereunder; B. Greenberg violated Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 thereunder and caused Incomnet's violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 12b-20, 13a-11, and 13a-13 thereunder; and C. Caswell caused Incomnet's violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b- 5, 12b-20, 13a-11, and 13a-13 thereunder. Based on the foregoing, the Commission deems it appropriate to accept the Offers submitted by Incomnet, Greenberg, and Caswell. Accordingly, IT IS HEREBY ORDERED that: (1) Incomnet cease and desist from committing or causing any violations or any future violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 12b-20, 13a-11, and 13a-13 thereunder; (2) Greenberg cease and desist from committing or causing any violations or any future violations of Sections 10(b) and 13(d) of the Exchange Act and Rules 10b-5, 13d-1, and 13d-2 thereunder and from causing any violations of or any future violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-11, and 13a- 13 thereunder; and (3) Caswell cease and desist from committing or causing any violations of or any future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and from causing any violations of or any future violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-11, and 13a-13 thereunder. By the Commission. Jonathan G. Katz Secretary **FOOTNOTES** [1]: The findings herein are made pursuant to Incomnet's, Greenberg's, and Caswell's Offers of Settlement and are not binding on any other person or entity named as a respondent in this or any other proceeding. [2]: Rule 10b-18 of the Exchange Act provides that, under certain conditions, a publicly held company may purchase its own shares pursuant to a buy back program without being deemed thereby to have violated Sections 9(a)(2) or 10(b) of the Exchange Act or Rule 10b-5 thereunder. [3]: As Incomnet's chief executive officer, president, and chief financial officer, Incomnet's Former CEO's mental state is imputed to Incomnet. See SEC v. Manor Nursing Centers, Inc. 458 F.2d 1082, 1089 n.3 (2d Cir. 1972). [4]: NASDAQ determined to continue listing Incomnet on the Small Cap Market shortly after Incomnet's Former CEO resigned from all positions at Incomnet. SERVICE LIST Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly authorized officer of the Commission, shall serve a copy of the Order Instituting Public Cease-and-Desist Proceeding, Making Findings and Issuing a Cease-and-Desist Order on each person named as a party in the Order and their legal agent. The attached Order Instituting Public Cease-and-Desist Proceeding, Making Findings and Issuing a Cease-and-Desist Order has been served upon the following parties and all persons entitled to notice: The Honorable Brenda P. Murray Chief, Administrative Law Judges Securities and Exchange Commission 450 Fifth Street, N.W., Mail Stop 11-6 Washington, D.C. 20549 Securities and Exchange Commission Division of Enforcement Branch of Regional Office Assistance Attn: Jay H. Perlman 450 Fifth Street, N.W., Mail Stop 8-9 Washington, D.C. 20549 Lisa A. Gok, Esq. Tom W. Rothenbucher, Esq. Pacific Regional Office Securities and Exchange Commission 5670 Wilshire Blvd., 11th Floor Los Angeles, CA 90036 Incomnet, Inc. c/o James R. Doty, Esq. Baker & Botts, L.L.P. The Warner 1299 Pennsylvania Avenue, N.W. Washington, DC 20004-2400 Joel W. Greenberg c/o James R. Doty, Esq. Baker & Botts, L.L.P. The Warner 1299 Pennsylvania Avenue, N.W. Washington, DC 20004-2400 Stephen A. Caswell c/o James R. Doty, Esq. Baker & Botts, L.L.P. The Warner 1299 Pennsylvania Avenue, N.W. Washington, DC 20004-2400 Rita L. Schwartz c/o James Sanders, Esq. Sheppard, Mullin, Richter & Hampton 333 South Hope St., 44th Floor Los Angeles, CA 90071