CHICAGO (CN) - A felon convicted of 117 securities violations, theft, perjury and passing bad checks defrauded investors of $1.5 million by falsely claiming a product had FDA approval, shareholders claim in court.
Lead defendant Kenneth A. Jackson effectively ran Medical Safety Solutions, though he and his crew "repeatedly misrepresented the true nature of the position held by Jackson within MSS," the shareholders say in their derivative complaint.
Lead plaintiff Evolutions Enterprises sued Jackson, the company, and four other officers - William Schureck, Marco Burnette, Richard Van Horn, and Albert S. Miller - in Federal Court.
The plaintiffs claim that Jackson and Medical Safety Solutions falsely claimed that the FDA had approved the Sharps Terminator, a small machine for destroying needles.
They claim the defendants induced them to "(a) collectively invest $365,000 to purchase MSS shares, (b) enter into a distributorship relationship with MSS relating to the Sharps Terminator, which MSS has breached, (c) enter into a manufacturing relationship with MSS relating to the Sharps Terminator, which MSS has breached, and (d) expend more than $1.5 million in connection with the manufacturing agreement to ensure that the Sharps Terminator functioned as represented and intended."
The plaintiffs add: "As part of their fraudulent scheme to induce the plaintiffs to purchase MSS shares, the Defendants also repeatedly misrepresented the true nature of the position held by Jackson within MSS, claiming that he was only the Director of Research & Development, when in fact, he was responsible for making all substantive decisions concerning MSS and the Sharps Terminator, regardless of whether such decisions were related to research and development.
"Indeed, the plaintiffs recently discovered that Jackson's true involvement and lack of officer or director title was part of the defendants' scheme because Jackson is a convicted felon, who in 1994 was convicted of 117 counts of securities violations, theft, perjury, and passing bad checks. Prior to that conviction, Jackson had been enjoined in 1991 from violating federal securities laws in a civil action brought by the Securities and Exchange Commission." (Citations omitted.)
In truth, the plaintiffs say, the company did not have FDA approval for the Sharps Terminator, so the plaintiffs are unable to sell the product in the United States, "thus rendering their MSS shares and their distributorship agreements worthless."
They seek an injunction and punitive damages for securities fraud, control person liability, fraudulent inducement, breach of contract, and unjust enrichment.
They are represented by Michael Tomlinson.
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