U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22733 / June 26, 2013
Securities and Exchange Commission v. Imaging3, Inc. & Dean Janes, United States District Court for the Central District of California, Civil Action No. CV13-04616 GAF (AJWx) filed June 25, 2013
SEC Charges Medical Imaging Device Company and Its Ceo with Fraud
The Securities and Exchange Commission today announced that it has filed fraud charges against Burbank, Calif.-based Imaging3, Inc., and its founder and chief executive Dean Janes for misleading shareholders about the Federal and Drug Administration's view of the company's medical imaging device.
Janes held a conference call with investors in November 2010 after the FDA denied clearance for Imaging3, Inc., to market its proprietary scanner, which provides three-dimensional images for use in medical diagnosis. The denial was the product's third, as the FDA denied clearance in 2008 and twice in 2010. Even though the FDA cited concerns about the safety of the device and the quality of the images, Janes told investors that the FDA's issues were "not substantive" and largely "administrative."
According to the SEC's complaint, filed in U.S. District Court for the Central District of California, on the conference call, Janes did not discuss the issues raised by the FDA in an October 2010 letter, such as the device's potential for over-heating, and the fact that some sample images the company submitted were "scientifically invalid and useless."
Even when asked on the call whether any of the FDA's concerns were "safety-related" or involved image quality, Janes said, "Nope," and that there was "really and honestly not one question about the technology or its consistency. It just doesn't make sense to me."
After an investor obtained the FDA's denial letter and posted it on an Internet blog in early 2011, Janes used his personal Facebook page in another effort to mischaracterize the denial, the SEC alleged. Janes and his company didn't officially issue the full text of the denial letter until earlier this year, more than two years after the call to discuss it.
The SEC's action charges Imaging3 and Janes with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b). It seeks a court order to bar them from future violations of federal securities laws, require them to pay civil monetary penalties, and bar Janes from serving as a public company officer or director.
Alka Patel and Katharine Zoladz of the Los Angeles Regional Office conducted the SEC's investigation and David Van Havermaat will lead the litigation.