The Securities and Exchange Commission recently charged two executives at a penny stock company with issuing false and misleading press releases while secretly selling thousands of their own stock shares into the market. The executives agreed to pay nearly $325,000 and accept officer-and-director bars to settle the SEC charges.
Defendant Conolog Corporation, a publicly traded company involved in the manufacture of communications equipment, issued three consecutive press releases in early 2010 that mischaracterized testing done on a new product and overstated customer orders. According to the complaint, defendant Robert Benou, Conolog’s Chairman-CEO-CFO, was principally responsible for the contents of the press releases with his son, defendant Marc Benou, Conolog’s President-COO. Conolog also hired a public relations firm to promote its stock using the statements from the releases. The public relations efforts resulted in a significant increase in the company’s stock price and trading volume, the SEC alleged. Both defendants sold Conolog stock at inflated prices during this period.
The SEC charged defendants with violating the antifraud provisions of the federal securities law, including Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5, Section 16(a) of the Exchange Act and Rule 16a-3, and Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2. The executives then settled the charges.
SEC v. Benou, et al., No. 3:14-cv-07284 (D.N.J. Nov. 21, 2014).