Investors Seek to Freeze the Assets of Comparator


Shareholders who have filed suit against Comparator Systems Corp. sought Wednesday to freeze the assets of the company and a San Diego brokerage that has been accused of manipulating its stock.

But an Orange County Superior Court judge in Santa Ana deferred a ruling until today to allow Comparator and La Jolla Capital Corp. to present additional information.

The class-action lawsuit, filed a week ago, contends that investors lost $300 million because “false statements and manipulations” triggered several days of record-setting trading of Comparator’s stock as well as a surge in value.

The lawsuit directs the allegations against both Newport Beach-based Comparator and La Jolla Capital, which was a leading market maker of the tiny company’s stock. Comparator and La Jolla Capital have denied the allegations.


Comparator, a once-obscure fingerprint technology company whose stock soared from pennies to almost $2 in a few days, also faces a lawsuit by the Securities and Exchange Commission. The SEC alleges the company lied about its finances, stole its key product and defrauded investors. Last week, regulators also obtained a temporary restraining order in federal court freezing the assets of three Comparator officers.

The SEC has subpoenaed La Jolla Capital for information but has not taken any action against the brokerage.

At Wednesday’s court hearing, Judge John C. Woolley appeared close to granting a temporary restraining order freezing profit that La Jolla Capital obtained in trading of Comparator stock. But Woolley decided to delay a decision after La Jolla Capital lawyers said such an order would be tantamount to putting the brokerage out of business.

The attorneys said La Jolla Capital could fail to meet certain capital requirements if those profits are frozen, but they could not provide more details. The attorneys suggested they would provide a better explanation at today’s hearing.


Robert C. Weaver Jr., a lawyer for La Jolla Capital, said after the three-hour hearing that he did not know how much the brokerage profited from the sale of Comparator shares.

Kirk B. Hulett, who represents the shareholders in the suit, said about 25 million shares of Comparator were traded by La Jolla Capital brokers. He added that he did not know the extent of the profits from the transactions.

Woolley also deferred his ruling on the request to freeze the assets of Comparator and Chief Executive Robert Reed Rogers and President Richard E. Floegel. But it seemed unlikely that such an order would be granted on Floegel, a relative newcomer to the company who has not been named as a defendant in the SEC’s suit.