U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19236 / May 24, 2005
Securities and Exchange Commission v. Mark W. Blodgett and StockerYale Inc., Civil Action No. 1:05 CV 01040 (DDC), filed May 24, 2005
S.E.C. Files Charges Against StockerYale and its CEO for the Fraudulent Dissemination of False and Misleading Press Releases
The United States Securities and Exchange Commission announced today that it filed a complaint in the United States District Court for the District of Columbia charging StockerYale, Inc. and Mark W. Blodgett with fraudulently publishing false and misleading press releases that misrepresented StockerYale’s involvement with a potentially lucrative Department of Homeland Security project. Blodgett is the Chief Executive Officer and President of StockerYale, a New Hampshire-based company listed on the NASDAQ National Market.
The complaint alleges that StockerYale and Blodgett failed to take adequate steps to verify certain material information contained in two false and misleading press releases created and published by StockerYale at Blodgett’s direction. Among other things, the press releases falsely stated that StockerYale was developing a laser for a missile countermeasure system for commercial planes pursuant to an order received from a defense contractor. Additionally, the press releases created the misleading impression that StockerYale was supplying the lasers as part of a Department of Homeland Security project. In fact, StockerYale was not involved in any Department of Homeland Security project and the lasers that StockerYale was developing for the contractor were not intended for use on commercial planes.
Within minutes of the publication of the first press release on April 19, 2004, the price and volume of StockerYale's common stock surged. On April 20, at the height of the surge, the share price reached $7.75, more than five times the average closing price for the prior 30 days and $6.30 more than the price at which the stock closed on Friday April 16. On the morning of April 20, Blodgett sold 250,000 shares of StockerYale common stock reaping profits of almost $790,000.
Without admitting or denying the allegations made by the Commission, Blodgett consented to the entry of an order permanently enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The order requires Blodgett to pay disgorgement plus interest in the amount of $788,118.92 and a civil penalty in the amount of $120,000. Additionally, without admitting or denying the allegations made by the Commission, StockerYale consented to the entry of an order permanently enjoining the company from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. StockerYale also agreed to maintain formal policies with regards to public communications, insider trading and corporate ethics.