James S. Eberhart

James S. Eberhart
Nationality	American
Occupation	Securities broker (former)
Known for	Debisys Inc. payment terminal fraud and Yes Entertainment securities fraud

James S. Eberhart is an American former securities broker who was the subject of multiple federal enforcement actions for securities fraud. In 2000, the United States Securities and Exchange Commission (SEC) obtained a final judgment against Eberhart for fraudulently selling $2.3 million in unregistered securities through Debisys, Inc., a point-of-sale terminal investment scheme. He was subsequently indicted on 23 counts of mail fraud and money laundering in connection with a separate $11 million securities fraud involving Yes Entertainment.

Early Life and Career

James S. Eberhart was based in Costa Mesa, California, where he operated as a securities broker. He became involved with Debisys, Inc., a company that marketed investment opportunities in point-of-sale payment processing terminals. These terminals were devices used by retailers to process ATM cards, debit cards, credit cards, check guarantee cards, and early "smart" cards.

Eberhart, along with his associate Mark T. Flanagan, positioned Debisys as a vehicle for investors to purchase terminals under a sale-leaseback arrangement, in which investors would buy the equipment and lease it back to merchants for a promised return.

Legal Case

Debisys Payment Terminal Fraud

On October 7, 1999, the SEC filed a civil complaint against Debisys, Inc., Mark T. Flanagan, and James S. Eberhart in the U.S. District Court for the Central District of California (Case No. 99-1237). The SEC alleged that from January through July 1997, Eberhart fraudulently sold $2.3 million in unregistered securities to approximately 150 investors nationwide.

The investment contracts were structured as interests in credit card processing equipment, but the SEC alleged that Eberhart and Flanagan did not file the necessary forms to secure the investors' interests in the terminals, meaning investors lacked legal ownership of the equipment despite paying for it. The SEC charged violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934, along with Rule 10b-5, for fraudulent sale of unregistered securities and material misrepresentations regarding investor protections.

Yes Entertainment Fraud

While the SEC was investigating the Debisys scheme, Eberhart became involved in a second, larger fraud. Along with Eugene M. Carriere and others, Eberhart was connected to Yes Entertainment, a company through which more than $11 million in securities were fraudulently sold.

In late 1999, as the SEC investigation intensified, Eberhart, Carriere, and another employee destroyed company documents and fled the country. Eberhart became an international fugitive, evading law enforcement for an extended period before eventually being apprehended.

He was indicted on 23 counts of mail fraud and money laundering in connection with the Yes Entertainment scheme.

Outcome

Debisys Settlement

On September 21, 2000, the Honorable David O. Carter of the U.S. District Court for the Central District of California entered a Final Judgment of Permanent Injunction and Other Relief against Eberhart. The judgment ordered him to pay:

• $76,102 in disgorgement of ill-gotten gains
• $3,625 in prejudgment interest
• $76,102 in civil penalties

Eberhart was also permanently enjoined from future violations of the securities laws.

Yes Entertainment Prosecution

The criminal case related to Yes Entertainment resulted in further consequences. Eugene M. Carriere, the leader of the fraudulent internet firm, was eventually sentenced to 10 years in federal prison. Eberhart faced separate criminal proceedings for his role in the scheme, including the 23 counts of mail fraud and money laundering.

The SEC also filed additional charges against Eberhart alongside Carriere, Richard Hines, and Kenneth Gottlieb for the Yes Entertainment fraud.