Phonetime victimized by internal theft

    Theft reveals that the Company is more profitable than previously

    MISSISSAUGA, ON, March 17 /CNW/ - Phonetime Inc. (TSX: PHD), a leading
supplier of international long distance telecommunication services, announced
today that during its year-end audit, its auditors discovered irregularities
that indicate the Company has been the victim of an internal theft totalling
approximately $1.4 million over the course of the last two years. Phonetime
believes that the entire amount of these irregularities has been reflected in
past financial statements as inflated cost of goods sold, suggesting that the
Company has been operating at a significantly more profitable margin than was
previously reported. Management is taking immediate and aggressive action to
resolve this issue and strengthen its internal controls.
    The Company suspects that a long-time employee, possibly working in
collusion with a second employee, used intimate knowledge of Phonetime's
control procedures to commit this theft. The Company has initiated a police
investigation and hired the services of specialized counsel at the law firm of
Bennett Jones LLC, to commence civil proceedings against the perpetrator(s).
Together with Bennett Jones, Phonetime has engaged the forensic auditing
services of Grant Thornton LLP. Once it has fully quantified the stolen
amount, Phonetime intends to pursue all available legal means in an effort to
recover the stolen funds. The Company's Audit Committee also plans to hire an
independent accounting firm to review Phonetime's internal control procedures,
implement any necessary changes and establish a set of rigorous governance
policies that exceed current requirements for Canadian public companies.
    "Only someone with in-depth knowledge of our control procedures would
have been able to conceal this theft and we are deeply saddened to learn that
such an action would come from within the Phonetime family," said Wayne
Silver, President and CEO. "While we are shocked and outraged at what has
occurred, on the positive side, this theft implies that the Company has been
significantly more profitable than was previously indicated. Over the past two
years we have earned an additional net profit of approximately $1.4 million."
    Mr. Silver continued: "We believe we have contained the breach and we are
committed to recovering as much of the stolen funds as possible. On the
operations side, we are currently enjoying growth at some of the fastest rates
in our corporate history, so while we work to strengthen our internal controls
and resolve other issues resulting from this theft, we will maintain our focus
on the rapidly unfolding market opportunity in front of us."

    About Phonetime Inc.

    Established in 1994, Phonetime Inc. is a leading international supplier
of wholesale long distance call delivery to large and small domestic and
international carriers as well as providing retail international long distance
telecommunication services for individual consumers and businesses. Phonetime
is a publicly traded company and its common shares are listed on the TSX
(TSX: PHD). Phonetime is licensed in Canada as a Class A International
Carrier, and is a vertically integrated telecommunication provider of both
wholesale and retail operations. Phonetime now has 125 staff located on six
continents and has facilities in Canada, Europe, Africa and South East Asia.
Its wholly owned subsidiaries and divisions include; Phonetime Network, with
operations in Toronto and Florida offering International Long Distance to
ILEC's CLEC's and PTT world-wide; Symphony Telecom, with operations in
Oaktown, Virginia and Cape Town, South Africa, which offers "direct"
telecommunications facilities to "hard to reach" but highly profitable routes
in Africa and South East Asia; Call Select, with an 55-seat call centre in
Vancouver, offers retail 1+ long distance home service to more than a dozen
ethnic communities across Canada; Phonetime International operates one of
Canada's largest private networks with 40 Points-of-Presence, covering 85% of
Canada's population. Phonetime International sells its excess Canadian network
capacity on a wholesale basis to major carriers world-wide, as well as
distributing long distance calling cards via nearly 2,500 retailers across

    Caution Regarding Forward Looking Information:

    This press release contains forward-looking statements within the meaning
of securities laws, including the "safe harbour" provisions of the Ontario
Securities Act and the United States Private Securities Litigation Reform Act
of 1995. Forward-looking information is often, but not always, identified by
the use of words such as "anticipate", "believe", "expect", "plan", "intend",
"forecast", "target", "project", "may", "will", "should", "could", "estimate",
"predict" or similar words suggesting future outcomes or language suggesting
an outlook.
    Forward-looking statements and information are based on current beliefs
as well as assumptions made by and information currently available to
Phonetime concerning anticipated financial performance, business prospects,
strategies and regulatory developments. Although management considers these
assumptions to be reasonable based on information currently available to it,
they may prove to be incorrect.
    By their very nature, forward-looking statements involve inherent risks
and uncertainties, both general and specific, and risks that predictions,
forecasts, projections and other forward-looking statements will not be
achieved. We caution readers not to place undue reliance on these statements
as a number of important factors could cause the actual results to differ
materially from the beliefs, plans, objectives, expectations and
anticipations, estimates and intentions expressed in such forward-looking
statements. These factors include, but are not limited to: incorrect
assessments of value when making acquisitions; increases in debt service
charges; fluctuations in foreign currency and exchange rates; inadequate
insurance coverage; changes in tax laws; and Phonetime's ability to access
external sources of debt and equity capital..
    The foregoing list of factors that may affect future results is not
exhaustive. When relying on our forward-looking statements to make decisions,
investors and others should carefully consider the foregoing factors and other
uncertainties and potential events. Furthermore, the forward-looking
statements contained in this press release are made as of the date of this
press release, and Phonetime does not undertake any obligation to up-date
publicly or to revise any of the included forward-looking statements, whether
as a result of new information, future events or otherwise. The
forward-looking statements contained in this press release are expressly
qualified by this cautionary statement.

For further information:

For further information: Ian Hochberg, Director, Phonetime Inc., (416)
505-4382,; Wayne Silver, President & C.E.O., (905) 361-8304,; Rodney Franklin, Chairman & CFO, (905) 361-8305,

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