LOS ANGELES (CN) - The SEC claims Heart Tronics, "a purported heart monitoring device company," installed retired pro football player Willie Gault as a "figurehead co-CEO," while the mastermind, attorney Mitchell J. Stein, hired promoters for an $8 million pump-and-dump stock scheme.
The SEC claims that Gault and his co-CEO, former Hollywood executive J. Rowland Perkins, "rarely questioned Stein's fraudulent agenda and abdicated their fiduciary responsibilities under the Sarbanes-Oxley Act."
In a statement announcing its lawsuit, the SEC said: "Stein and Gault together defrauded one investor into making a substantial investment in Heart Tronics based on false representations that his money would fund the company's operations. Instead, Stein and Gault diverted the investor's proceeds for personal use, including the purchase of Heart Tronics stock in Gault's personal brokerage account 'Catch 83' to create the false appearance of volume and investor demand for the stock."
The SEC's associate enforcement director Stephen Cohen added: ""Stein secretly sold millions of dollars in stock while peddling false claims of Heart Tronics's lucrative sales orders, and has been living the high life off his illicit proceeds with multiple homes, exotic cars, and private jets."
Sued along with Heart Tronics, Gault, Stein and Perkins were Stein's chauffeur and "handyman" Martin B. Carter of Boca Raton, Fla., stock promoter Ryan A. Rauch of San Clemente, Calif., and Spokane, Wash. Stockbroker Mark C. Nevdahl.
Heart Tronics was known as Signalife from December 2005 to December 2008.
EDITOR'S NOTE: An earlier version of this article incorrectly stated that Mr. Stein had pleaded guilty to parallel criminal charges and also incorrectly attributed that statement to the Department of Justice. Mr. Stein has not pleaded guilty to parallel criminal charges and vigorously denies the charges in the indictment. Courthouse News Service regrets the error.
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