- Jury found former NFL receiver had role in stock scheme
- Heart Tronics board's audit chief held same role at Valeant
Former Chicago Bears wide receiver Willie Gault was ordered by a California judge to pay more than $200,000 related to securities-law violations for taking part in a scheme to artificially inflate the shares of a medical-device maker.
As co-chief executive officer of Heart Tronics Inc., Gault, 55, was found liable last year in a securities fraud scheme. The jury also found he knowingly circumvented internal accounting controls and made false CEO certifications in a public filing with the Securities and Exchange Commission.
U.S. District Judge James Selna in Santa Ana, California, didn’t impose the highest possible civil penalties on Gault for his part in the fraud scheme, saying he couldn’t presume Gault knowingly participated in the scheme rather than merely being negligent.
Gault’s lawyer, George Newhouse, said his client didn’t personally profit from the wrongdoing by a “fraudster,” who was later convicted in a related case. He said Gault will appeal the judgment.
“Mr. Gault will continue to defend his good name at all levels,” Newhouse said in an e-mail.
The judgment against Gault, a former sprinter and National Football League star, represents a final chapter in the saga of Heart Tronics -- which was, the SEC alleged in a complaint against one of its owners, the center of “a series of brazen fraudulent schemes” beginning in 2005.
The Heart Tronics matter resurfaced in recent months in relation to troubles at a different company -- Valeant Pharmaceuticals International Inc. From 2005 to 2007, the Heart Tronics board member who oversaw the company’s audits was Norma Provencio, who now holds a similar role at Valeant.
Provencio wasn’t accused of wrongdoing. Valeant has said Provencio is an accomplished forensic accountant who was carefully vetted and supported by shareholders and who believed the government handled the Heart Tronics matter appropriately.
The judgment against Gault comes a year after the jury found he didn’t commit fraud. The jury did conclude he was liable for filing false certifications with the SEC and circumventing Heart Tronics’s internal controls.
The SEC said Friday in a statement that Gault transferred $101,000 of investor funds to a private brokerage account that he controlled, and then lost that money on stock trades that weren’t authorized by the company.
He was ordered by Selna to pay $101,000 in disgorgement, $27,570 in prejudgment interest, and $78,000 in civil penalties. The judge also barred him from acting as an officer or director of any public company until he demonstrates that “he has made himself knowledgeable”of securities law requirements.
“The court’s imposition of the bar recognizes the seriousness and impact of Gault’s violations of the securities law and reinforces the importance of CEOs understanding their obligations under the federal securities laws,” SEC Enforcement Director Andrew Ceresney
The case is SEC v. Heart Tronics Inc., 11-cv-01962, U.S. District Court, Central District of California (Santa Ana).