What's sad about this whole thing is that the SEC didn't even have the decency to come out and tell investors that the company was under investigation. I bought shares during the time frame when the SEC was fully aware that there was no government contract!
I suspected they'd nab him too. Unfortunately, he apparently didn't have the funds to pay disgorgement of his ill-gotten gains. He got off easy IMO. Here's the SEC release and direct link.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21267 / October 29, 2009
Securities and Exchange Commission v. J. Bennett Grocock, Civ. Action No. 09-cv-1833 (M.D. Fla.) (GJK)
SEC Files Settled Insider Trading Charges against CyberKey Solutions, Inc.'s Former Outside Counsel
Today the Securities and Exchange Commission ("Commission") filed a civil action in the U.S. District Court for the Middle District of Florida, alleging that J. Bennett Grocock, the former outside counsel for CyberKey Solutions, Inc. ("CyberKey"), made at least $170,000 by selling shares of the company's stock while in possession of material, nonpublic information about the company. Grocock also sold CyberKey shares before he possessed material, nonpublic information about the company, but none of the shares he sold were issued under a registration statement or with any legitimate exemption from registration.
According to the Commission's complaint, Grocock became aware in the summer and fall of 2006 that CyberKey was under investigation for possible securities violations by several different agencies, including the Commission, the then-National Association of Securities Dealers, and the Utah Division of Securities. Despite being aware of these investigations, any one of which would have had material consequences for the company if carried forward to its logical conclusion, Grocock continued to sell CyberKey shares and in fact accelerated his sales after learning of the Commission's investigation in mid-November 2006. Grocock generated $248,800 in total from his sales, which ended shortly after CyberKey's CEO was arrested and charged with civil and criminal securities fraud, among other things, in March 2007.
Grocock has consented, without admitting or denying the allegations in the complaint, to a permanent injunction against future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, as well as against future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933. On the basis of sworn financial statements and other documents and information furnished to the Commission, payment of disgorgement was waived and civil penalties were not imposed.
A former attorney for a St. George company has been sued for insider trading for selling shares after he learned the company was under investigation.
The Securities and Exchange Commission filed suit in federal court in Florida against J. Bennett Grocock, the former attorney for CyberKey Solutions.
Grocock made at least $170,000 selling shares of CyberKey after he became aware of the SEC was in investigating the company. The investigation ended when CyberKey's CEO was arrested and charged with criminal fraud and sued by the SEC.
Grocock consented to an injunction barring him from future securities violations, the SEC said last week. No financial penalties were imposed.
CyberKey's former president and CEO, James E. Plant, is in prison after pleading guilty.
A complaint filed in March 2007 in Pennsylvania said Plant, "engaged in an elaborate scheme to publicize a fictitious $25 million purchase order from the U.S. Department of Homeland Security and other false claims to attract interest in CyberKey."
CyberKey, which purported to sell flash memory drives and other devices, received at least $1.5 million after issuing hundreds of millions of shares of stock, according to the SEC lawsuit.
According to court documents, Plant "engaged in rather extravagant spending patterns, including the purchase of expensive cars and vacations."
Plant pleaded guilty to four charges and was sentenced to 97 months in prison.
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