One troublesome form of stock broker misconduct involves the use of celebrity status in order to gain the trust and secure the business of investors. One major problem with this type of scam is that many investors don’t want to admit that they made an investment decision based on the celebrity status of the spokesperson. However, investment attorneys encourage victims of fraud — regardless of their motivations for investing — to seek reimbursement of their losses through securities arbitration.
While fraud cases that use the celebrity status of an individual to gain investor trust are nothing new, the most recent incident used the fame of a former Olympic sprinter and NFL wide receiver Willie Gault. Gault managed a California-based medical device company called Heart Tronics. Between 2006 and 2008, the company announced fake sales orders for heart-monitoring devices valued at millions of dollars.
The Securities and Exchange Commission filed a complaint on December 20, 2011, in the United States District Court in California. In addition, the SEC sued Mitchell Stein, who hired promoters to use the Internet to tout the company’s stock and controlled most of Heart Tronics’ business activities. Also named in the complaint were J. Rowland Perkins, Gault’s co-chief executive officer and founder of Creative Artists Agency LLC, and Martin Carter, Stein’s chauffer and handyman.
The SEC stated that Gault’s installation as Heart Tronics’ co-CEO and president was done for the purpose of generating publicity and fostering investor confidence. Associate director in the SEC’s enforcement division, Stephen L. Cohen, stated that “Stein took advantage of Gault’s celebrity to further prop up the image of Heart Tronics as a successful enterprise.” Cohen went on to state that “Stein secretly sold millions of dollars in stock while peddling false claims of Heart Tronics’ lucrative sales orders, and has been living the high life off his illicit proceeds with multiple homes, exotic cars and private jets.”
If you, like many Heart Tronics investors, have been the victim of fraud because of trust that was secured through the celebrity status of an individual, do not hesitate to contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.