(Bloomberg News) Willie Gault, the former NFL wide receiver and Olympic sprinter, was accused by U.S. regulators of taking part in a scheme to artificially inflate the stock of a medical-device company that he helped manage.
Studio City, California-based Heart Tronics repeatedly announced millions of dollars in fake sales orders for its heart-monitoring devices between 2006 and 2008, the Securities and Exchange Commission said in a complaint filed today at U.S. District Court in California. The SEC also sued Gault's co-chief executive officer J. Rowland Perkins, attorney Mitchell Stein, and Stein's handyman and chauffeur Martin B. Carter.
Gault, 51, was installed as Heart Tronics' president and co-CEO in October 2008 to generate publicity for the company and foster investor confidence, the SEC said. Stein, who controlled most of the company's business activities, hired promoters to tout Heart Tronics stock on the Internet. The defendants reaped nearly $8 million by trading the stock, according to the complaint.
"Stein took advantage of Gault's celebrity to further prop up the image of Heart Tronics as a successful enterprise," Stephen L. Cohen, an associate director in the SEC's enforcement division, said in a statement. "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."
Jared Scharf, an attorney who represents Gault, Perkins and Heart Tronics, said his clients denied accounts of falsified sales. "The company intends to defend the lawsuit vigorously," Scharf said.
The SEC sued a total of six individuals, and Stein was named by the Justice Department in a parallel criminal case, the SEC said. A phone call to Stein's Woodland Hills, California, law firm wasn't immediately returned. A phone number listed to Martin B. Carter in Clewiston, Florida, was disconnected.
Gault and Perkins -- a founder of Creative Artists Agency LLC, one of the largest U.S. talent agencies -- rarely questioned Stein's actions and didn't fulfill fiduciary responsibilities as corporate officers, the SEC said. Stein and Gault together defrauded one investor into making a substantial investment in Heart Tronics, only to divert the person's funds into Gault's personal brokerage account, according to the complaint.
After playing football at the University of Tennessee, Gault went on to play 11 seasons as a wide receiver in the National Football League for the Chicago Bears, where he was a member of the 1985 Super Bowl championship team, and for the Los Angeles Raiders.
Gault was also a member of the U.S. Olympic team which boycotted the 1980 Summer Olympics in Moscow, and later trained with the U.S. Olympic bobsled team.
Gault founded a not-for-profit, Athletes for Life, through which he "toured the country giving free heart scans" with Heart Tronics technology, Scharf said. The organization's online membership list includes athletes John Elway, Marshall Faulk, Earvin "Magic" Johnson, Carl Lewis, Jackie Joyner-Kersee, Jerry Rice and dozens of others.