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U.S. Securities and Exchange Commission

U.S. Securities and Exchange Commission
Washington, D.C.

Litigation Release No. 16835 / December 20, 2000

Accounting and Auditing Enforcement Release No. 1354

SEC v. Franklin W. Brooks and John L. Gardner (Civil Action No. 00-9110-CIV-Ryskamp) (S.D. Fla.).


The Securities and Exchange Commission today filed a settled civil complaint in the United States District Court for the Southern District of Florida against Franklin W. Brooks, 66, and John L. Gardner, 64. Brooks is the current Chairman, and Gardner is the former president and CEO, of Saf T Lok, Inc., a manufacturer of gun safety locks headquartered in West Palm Beach, Florida. The complaint alleges that Brooks and Gardner violated the antifraud provisions of the federal securities laws and that Gardner aided and abetted Saf T Lok's violations of the periodic reporting provisions. In a related matter, today the Commission also issued a cease-and-desist order against the company, In the Matter of Saf T Lok, Inc.

The complaint alleges that at various times in 1997 and 1998, Brooks and/or Gardner caused Saf T Lok to publish various press releases and to make periodic filings with the Commission that falsely described certain sales, consulting and development contracts to which Saf T Lok was a party. These false disclosures described agreements that, if bonafide, would have resulted in the sale of millions of dollars of Saf T Lok's products or otherwise materially enhanced Saf T Lok's business. Among the false or misleading statements alleged in the complaint are the following:

  • That Saf T Lok had entered into a consulting agreement to pay another entity $250,000 for a variety of business services, when in fact the entity was a shell with no ability to provide any services, and the contract was entered into at the demand of Shalom Weiss, an individual who was otherwise assisting Saf T Lok in a capital-raising transaction;

  • That Saf T Lok had entered into a distribution agreement that would result in the sale of at least $20 million in Saf T Lok's products, when in fact the distributor was a newly-formed entity that lacked financing, was unable to perform, and was contractually obligated to purchase only $1 million of Saf T Lok's products;

  • That Saf T Lok had entered into a contract to develop a fingerprint-sensitive trigger lock that would be available by the end of 1998, when Saf T Lok was unwilling to provide the financing required to develop the product.

Additionally, the complaint alleges that Brooks and Gardner authorized Saf T Lok in 1998 to pay for a research report that included materially false and misleading financial projections. Brooks and/or Gardner provided misleading information to the author, edited a draft of the report, represented that the report was consistent with the company's views, and then released the report for public distribution.

Simultaneously with the filing of the complaint, Brooks and Gardner each consented, without admitting or denying the allegations in the complaint, to the entry of final judgments enjoining both of them from future violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and, enjoining Gardner from future violations of Section 13(a) of the Exchange Act and Rules 13a-11, 13a-13 and 12b-20 thereunder. Brooks and Gardner also each agreed to pay a $55,000 civil penalty.

In a related matter, the Commission also instituted public administrative proceedings against Sat T Lok and simultaneously accepted Saf T Lok's offer to consent to entry of a Commission Order finding that it violated Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 13a-11, 13a-13 and 12b-20 thereunder and directing it to cease and desist from further violations of those provisions.

The Commission's investigation in this matter is continuing.

This enforcement action is part of the Commission's four-pronged approach to attacking Microcap abuses: enforcement, inspections, investor education and regulation. For information about the SEC's response to Microcap fraud, visit the SEC's Microcap Fraud Information Center at http://www.sec.gov/news/extra/microcap.htm.