U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20530 / April 17, 2008
Securities and Exchange Commission v. Southwestern Medical Solutions, Inc. et al., Civil Action No. 8:08-cv-00731-RAL-TBM (M.D. Fla. April 16, 2008)
SEC Files Enforcement Action Against Southwestern Medical Solutions, Inc, and Others in Connection With the Publication of False and Misleading Press Releases
On April 16, 2008, the Commission filed a civil injunctive action against Southwestern Medical Solutions, Inc. ("Southwestern"), a company that purportedly develops and manufactures diagnostic testing devices for the detection of infectious diseases, John R. Hedges, its president and chief executive officer, Richard R. Powell, its vice president, and Basil J. Meecham, a director, alleging violations of the antifraud provisions of the federal securities laws in connection with the publication of false and misleading press releases.
According to the Commission's complaint, from at least January until late August 2006, Southwestern issued several false and misleading press releases claiming that: the Food and Drug Administration ("FDA") had approved its Labguard diagnostic testing device; it had received an order for several thousand units of the Labguard device; and it had pending patents and trademarks with the U.S. Patent and Trademark Office. The complaint also alleges that Southwestern submitted false and misleading information about its business to the Pink Sheets, an inter-dealer electronic quotation and trading system in the over-the-counter securities market. The complaint further alleges Hedges, Powell, and Meecham were responsible in various capacities for preparing and disseminating the false press releases and false information provided to the Pink Sheets.
The Commission's complaint charges the defendants with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10(b) thereunder. The complaint seeks permanent injunctions prohibiting future violations of the securities laws against all defendants, and the imposition of civil penalties, penny stock bars, and officer and director bars against Hedges, Powell and Meecham.