Risk & Compliance

SEC Alleges False Homeland Security Deal

Charges that technology company and its CEO ''engaged in an elaborate scheme to publicize a fictitious $25 million purchase order'' from the federa...
Stephen Taub and Dave CookMarch 21, 2007

A Utah-based technology company and its CEO made at least $1.5 million by disseminating false claims of a lucrative deal with the Department of Homeland Security, alleged the Securities and Exchange Commission.

The commission charged that beginning in November 2005, CyberKey Solutions and its chief executive officer, James E. Plant, “engaged in an elaborate scheme to publicize a fictitious $25 million purchase order” from Homeland Security for the company’s flash memory devices. In reality, CyberKey had no business relationship at all with the department, according to the SEC.

According to the commission, CyberKey and Plant engaged in an unregistered offering of the company’s shares, and promoted it with a series of false statements made through press releases, postings to the Pink Sheets, and a video webcast. CyberKey and Plant falsely claimed that the company had shipped products to Homeland Security and received payments, and that CyberKey was in the process of preparing and releasing audited financials, the SEC elaborated.

In a related criminal action, Plant was charged with securities fraud by the Federal Bureau of Investigation.

The SEC is seeking permanent injunctions against future violations of securities laws and disgorgement of ill-gotten gains, including prejudgment interest and civil penalties.

J. Bennett Grocock, an attorney representing CyberKey, declined to comment. Plant’s attorney, Gary Krupkin, could not immediately be reached for comment.