SEC Sues Imaging and CEO Dean Janes for Fraud
On June 26, 2013, the Securities and Exchange Commission (“SEC”) filed an enforcement action charging Imaging3, Inc. (IMGGQ), and Dean Janes, its CEO, with securities fraud, accusing Janes of misleading shareholders about actions taken by the Food and Drug Administration (“FDA”) in connection with the company’s product. Imaging3, which stopped making required financial filings with the SEC in mid-2012, trades spottily on OTCMarkets’ Pink No Information tier and is in bankruptcy.
According to the SEC action, it sent Wells Notices to Janes and IMGGQ after its investigation last November, warning them the contemplated enforcement action. The SEC action alleges that on November 1, 2010, Janes held a conference call with concerned investors after the FDA denied clearance for IMGGQ to market its proprietary scanner, which it claimed to provide three-dimensional images to be used in medical diagnosis.
The denial was IMGGQ’s third. Even though the FDA had noted that some images submitted by IMGGQ in connection with its request were “scientifically invalid and useless,” and had added that the device had potential for overheating, Janes assured callers that there was “really and honestly not one question about the technology or its consistency.” He added that the reasons for the FDA’s denial were mostly “administrative,” even “ridiculous,” and had nothing to do with the scanners safety or image quality. He complained further that the rejection “totally blindsided myself [sic] and management and we’re not gonna take this lying down.”
Janes did not publish the FDA letter itself. According to the SEC action, he later admitted that he didn’t believe it was “always good to put out negative information, though it would have been more accurate.”
In January 2011, a shareholder obtained a copy of the letter and posted it on the Investor’s Hub IMGGQ message board. According to the SEC Action, Imaging3 did not release its own copy until February 28, 2013.
The SEC Action is seeking to enjoin Imaging3 and Janes from violating antifraud provisions of the securities laws, to require both to pay monetary penalties, and to bar Janes from serving as an officer or director of a public company.
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