Accounting and Auditing Enforcement Release No. 3486 / September 18, 2013
Securities and Exchange Commission v. Imaging Diagnostic Systems, Inc., Linda Grable, and Allan Schwartz, Civil Action No. 0:13-cv-62025- (S.D. FL.) (September 18, 2013)
SEC Charges Imaging Diagnostic Systems, Inc., Its Ceo, and Cfo with Fraud
The Securities and Exchange Commission today filed an enforcement action in the U.S. District Court for the Southern District of Florida charging Imaging Diagnostic Systems, Inc. (“Imaging”), a Florida-based medical technology company, Linda Grable, its CEO, and Allan Schwartz, its CFO, for making material misstatements and omissions in Imaging’s filings concerning the timing of its Food and Drug Administration (“FDA”) application and concerning Imaging’s failure to remit payroll taxes to the Internal Revenue Service (“IRS”).
Imaging is engaged in the development and testing of a breast imaging system, the CTLM®, which purportedly uses a laser to detect breast cancer. Imaging to date has failed to obtain FDA approval to market and sell the CTLM® in the United States. The SEC’s complaint alleges from October 2008 to December 2009, Imaging repeatedly disclosed in filings and letters to shareholders that it expected to file, by specific deadlines identified in these public statements, a Premarket Approval (“PMA”) application with the FDA to obtain permission to market and sell the CTLM®. Each time, Imaging failed to meet its projected deadline. The complaint alleges that Grable and Schwartz knew there was no basis for the projections because Imaging did not have enough cancer cases to finish its clinical trials and could not pay for the clinical sites.
In addition, according to the complaint, beginning in the quarter ended March 31, 2010, Imaging stopped remitting payroll to the IRS for its employees. The complaint alleges that Imaging’s failure to pay pa