SEC v. Willie Gault, No. LR-23522, Central District of California (Apr. 15, 2016) — Press Release

U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 23522 / April 15, 2016 Securities and Exchange Commission v. Heart Tronics, Inc., et al., Civil Action No. SACV 11-1962 JVS (C.D. Ca.) Final Judgment Against Willie Gault Imposes Penalties, Disgorgement, and Injunction Against Serving as Public Company Officer or Director The U.S. District Court for the Central District of California yesterday evening issued a final judgment against former professional football player Willie Gault, who served as co-CEO of Heart Tronics, Inc. in 2008. After a two-week trial in March 2015, a jury found Gault liable for taking part in a securities fraud scheme, knowingly circumventing Heart Tronics' internal accounting controls, and making false CEO certifications in a public filing with the Commission. The court ordered Gault to pay $101,000 in disgorgement, $27,570 in prejudgment interest, and $78,000 in civil penalties, for a total of $206,570. The court also imposed permanent injunctive relief against Gault, including an equitable bar against acting as an officer or director of any public company until Gault affirmatively demonstrates that "he has made himself knowledgeable of the requirements of the securities laws imposed on officers and directors" and "otherwise become competent and fit to serve as an officer or director." Gault is also enjoined from committing future violations of Section 17(a)(3) of the Securities Act of 1933, Section 13(b)(5) of the Securities Exchange Act of 1934, and Rule 13a-14 of the Exchange Act. The jury had found Gault liable for his knowing or negligent involvement in a fraudulent scheme that misappropriated funds from an investor in Heart Tronics. While acting as a CEO, Gault transferred $101,000 of investor funds to a private brokerage account that he controlled, after which the funds were lost by Gault in stock trading that the company never authorized. Additionally, Gault was found liable, as CEO, for knowingly circumventing or failing to implement internal accounting controls at Heart Tronics, and for filing a Form 10-Q with the SEC in 2008 that made false Sarbanes-Oxley certifications. The other defendants charged in this matter had previously settled with the Commission or been found liable as a matter of law by the court by summary judgment. The trial team from the Commission consisted of trial attorneys Kenneth Donnelly, Derek Bentsen, Melissa Armstrong, and investigative attorneys from the Division of Enforcement, Adam Eisner, Rachel Nonaka and Ashley Dolan. For further information, see Litigation Release No. 22204 (Dec. 20, 2011); Litigation Release No. 22440 (Aug. 8, 2012); Litigation Release No. 23081 (Sep. 10, 2014); Litigation Release No. 23205 (Feb. 23, 2015). SEC Complaint

U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 23522 / April 15, 2016 Securities and Exchange Commission v. Heart Tronics, Inc., et al., Civil Action No. SACV 11-1962 JVS (C.D. Ca.) Final Judgment Against Willie Gault Imposes Penalties, Disgorgement, and Injunction Against Serving as Public Company Officer or Director The U.S. District Court for the Central District of California yesterday evening issued a final judgment against former professional football player Willie Gault, who served as co-CEO of Heart Tronics, Inc. in 2008. After a two-week trial in March 2015, a jury found Gault liable for taking part in a securities fraud scheme, knowingly circumventing Heart Tronics' internal accounting controls, and making false CEO certifications in a public filing with the Commission. The court ordered Gault to pay $101,000 in disgorgement, $27,570 in prejudgment interest, and $78,000 in civil penalties, for a total of $206,570. The court also imposed permanent injunctive relief against Gault, including an equitable bar against acting as an officer or director of any public company until Gault affirmatively demonstrates that "he has made himself knowledgeable of the requirements of the securities laws imposed on officers and directors" and "otherwise become competent and fit to serve as an officer or director." Gault is also enjoined from committing future violations of Section 17(a)(3) of the Securities Act of 1933, Section 13(b)(5) of the Securities Exchange Act of 1934, and Rule 13a-14 of the Exchange Act. The jury had found Gault liable for his knowing or negligent involvement in a fraudulent scheme that misappropriated funds from an investor in Heart Tronics. While acting as a CEO, Gault transferred $101,000 of investor funds to a private brokerage account that he controlled, after which the funds were lost by Gault in stock trading that the company never authorized. Additionally, Gault was found liable, as CEO, for knowingly circumventing or failing to implement internal accounting controls at Heart Tronics, and for filing a Form 10-Q with the SEC in 2008 that made false Sarbanes-Oxley certifications. The other defendants charged in this matter had previously settled with the Commission or been found liable as a matter of law by the court by summary judgment. The trial team from the Commission consisted of trial attorneys Kenneth Donnelly, Derek Bentsen, Melissa Armstrong, and investigative attorneys from the Division of Enforcement, Adam Eisner, Rachel Nonaka and Ashley Dolan. For further information, see Litigation Release No. 22204 (Dec. 20, 2011); Litigation Release No. 22440 (Aug. 8, 2012); Litigation Release No. 23081 (Sep. 10, 2014); Litigation Release No. 23205 (Feb. 23, 2015). SEC Complaint