Risk & Compliance

Phony Katrina Claim Costs CEO $100K

The CEO of a penny stock company that claimed to be involved in Katrina relief efforts has settled SEC charges of making false and misleading state...
Stephen TaubJuly 7, 2006

The former chief executive officer of a water-treatment company, who allegedly made false claims about the company’s involvement in Hurricane Katrina relief efforts, has agreed to pay $100,000 to settle charges by the Securities and Exchange Commission.

The commission’s complaint charges that Dennis Mast, former CEO of HydroFlo, misled investors by repeatedly publishing false statements claiming that the company’s subsidiaries were providing filtration equipment and water-purifying consulting services to government agencies engaged in the relief efforts. According to the SEC, the company neither shipped any products nor provided any services.

The company and Mast were also accused of touting a positive stock analyst report as “independent” and “unbiased” without disclosing that HydroFlo had paid $19,500 for the coverage.

Mast, who settled without admitting or denying the commission’s allegations, is barred from serving as an officer or director of a public company, and is also barred from participating in offerings of a penny stock.

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