Comparator Officers Insist Company Legit
Executives at Comparator Systems Corp. said Saturday that, contrary to allegations in a federal lawsuit, their company is legitimate and they did not steal their product from a professor.
Chief Executive Robert Reed Rogers and Vice President Gregory Armijo also asserted that the government’s accusations against them rely on the testimony of people out to damage the company.
Rogers and Armijo, officials whose personal assets were frozen in connection with a federal fraud investigation, expressed bewilderment at the government’s claims against them and their company.
Asked during a lengthy interview at Comparator’s Newport Beach offices whether the company is legitimate, Rogers said, “I swear that it is, and we’re going to do our best to prove that.”
Rogers and Armijo spent more than an hour rebutting numerous allegations made in a civil suit filed Friday by the Securities and Exchange Commission. The suit seeks to bar the two men plus a former Comparator executive from ever serving as officers of any public company.
The suit accuses Comparator, a tiny company that makes electronic fingerprint identification systems, of lying about its finances, cheating investors by selling millions of shares of virtually worthless stock and stealing its key product from a professor in Scotland.
The SEC launched an investigation of Comparator nearly a month ago when the company’s long-dormant stock set three trading records on the Nasdaq market.
Sitting in a roomy office sprinkled with stacks of documents related to the case, Rogers and Armijo said they didn’t learn of the suit until they were served with it late Friday.
Rogers acknowledged that in 1991 the company borrowed a prototype of a fingerprint system from Peter Denyer, a professor at Edinburgh University in Scotland. The company had a contract to market the device under the Comparator name, he said, “but we concluded we couldn’t market the product; it wasn’t fast enough or accurate enough.”
Rogers said the return of the device was delayed because he was in Malaysia for two years meeting with investors and trying to get a new production facility built. He said that he had ordered an employee to return the device to Scotland and that he was dismayed more than a year later to find upon his return to Newport Beach that the device was still in the office.
The employee assigned to return the product was Kay Churchill, a corporate secretary the company later fired and accused in a lawsuit of embezzling stock and cash. In an interview with the SEC, Churchill said Rogers admitted to her that he had stolen the product, according to court documents.
“The same person saying we stole it happens to be the person administering the company” while the executives were in Malaysia, Rogers said.
Reached at his home in Scotland on Saturday, Denyer said Comparator ignored his repeated attempts to have the device returned. “We couldn’t get through to them; we couldn’t get our calls returned,” he said.
“It’s quite usual for us to loan equipment to a potential customer and get it returned,” Denyer said. “I don’t remember anything unusual about [the loan to Comparator] except that we didn’t get it back.”
The device was finally returned in 1994, he said, in a box that included a brief written apology from the company, the only communication he said he ever received from Comparator.
Rogers said the fingerprint device the company demonstrated at an Atlanta trade show last month was not based on Denyer’s product. The two products have as much in common, he said, “as a jet plane has to a horse and buggy.”
Rogers also rebutted the SEC’s claims that Comparator has lied about its financial base. The suit alleges it overstated assets to include expired patents, two inactive subsidiaries and more than $600,000 that had allegedly been embezzled by Churchill and was unlikely to be recovered.
Rogers said the company’s accountants instructed it to continue to list the embezzled amount because it was expected to be recovered. One of the inactive subsidiaries was reactivated last month, he said, to help market the company’s new product. And Comparator still expects to recover through a lawsuit its investment in the other subsidiary.
“The auditors are the ones who make those determinations. I’m not an accountant,” Rogers said. He pointed out that Nasdaq market regulators long had been aware of the company’s asset situation.
The SEC, however, contends that Rogers knew the company’s assets were inflated, a claim supported by the testimony of Marc Berens of Berens Credit Corp. in Houston. Comparator sought capital from Berens, a request that Berens said he rejected after examining the company’s books, according to the documents.
“I asked [Rogers] point-blank, I said, ‘So in other words, your entire balance sheet is puff,’ ” Berens said, “and he agreed that he was going to make the adjustments in the future.”
But Rogers said Comparator never went to Berens seeking capital. Instead, Rogers said, Berens had made an unsolicited offer to buy the company and was infuriated when the company rejected the offer.
Rogers and Armijo both stressed that they have worked years to make Comparator a successful company, often at personal sacrifice. Rogers said he has sold a house and a car to raise cash to keep the company afloat, and Armijo said he has often been unable to pay rent on his Newport Beach apartment because the company cannot afford to pay his full salary.
Armijo said neither he nor any other insider at the company sold Comparator stock during a remarkable May 3-7 run-up in which the price of Comparator shares soared from 6 cents to as high as $1.88 a share.
Armijo said he did sell about 250,000 shares of stock several days before the trading surge at 4 cents per share. That, he said, is evidence that the company was not manipulating stock, “or I’m the dumbest inside trader in the world.”
“We’re quite willing to have everything about this company exposed to scrutiny,” Rogers said. “We didn’t work for 13 years to rip off people on stolen technology.”
