Comparator Conundrum: Honest Mistake or Con Job?

The roomy Newport Beach office of Robert Reed Rogers reflects the tastes of a man who cultivates a dignified and worldly air. There are Indonesian tapestries, a replica of Egyptian papyrus and a lamp like those that once lit the cabins of the Orient Express.

But the most unsettling decoration in Rogers’ office--an uncanny copy of a ticking bomb--may be the most appropriate image for the company he runs.

After ticking softly for 17 years, Comparator Systems Corp. blew up last month in an unprecedented stock market explosion that has left federal investigators scurrying around the country trying to pick up the pieces.

Sifting through the debris, investigators are confronting a bizarre and complex story that involves the mysterious death of a Yugoslavian prince, the transfer of millions of shares of stock in shell companies registered in Nevada, and the crucial testimony of a former Comparator executive who later took a job as a porn movie actress.

It also involves thousands of investors who made and lost millions of dollars on a company they didn’t understand, as well as the relationship between Comparator and La Jolla Capital Corp., a San Diego brokerage that is home to employees once convicted of drug charges and shoplifting, according to regulatory records.

All of this is the fallout from a money-losing maker of electronic fingerprint scanners that has spent the last 17 years in states ranging from dormancy to near death. The company survived on what federal investigators say was its one true talent: issuing stock, lots of it.

Comparator used stock to pay executives in lieu of salary, to settle debts with other companies, and even pay for the services of lawyers and dentists, according to company financial records.

Last month, with 610 million shares of stock stretching the seams of this tiny company, the volatile mix finally exploded. In three days, Comparator set three trading records on the Nasdaq market and its shares rose more than 30-fold in value before regulators--who had missed earlier warning signs--pulled the plug.

On May 31, the Securities and Exchange Commission filed a sweeping lawsuit accusing the company of fraud, and seeking to bar Rogers, Vice President Gregory Armijo and former executive Scott Hitt from ever serving again as officers of any public company. Rogers, 67, denies any wrongdoing at the company.

Dozens of interviews with regulators, witnesses and company officials, combined with the examination of thousands of pages of documents, yields a portrait of a company that has an almost animalistic will to survive, a will so strong that it went to great lengths to protect the heavy flow of stock that was its lifeline.

For despite all the characters that populate the Comparator stage, the company’s stock is--and always was--the main player in the story.

Comparator entered the public market in July 1979 through the now-defunct underwriter Blinder, Robinson & Co.--a Denver penny-stock specialist derisively dubbed “Blind ‘Em and Rob ‘Em.” The firm’s founder, Meyer Blinder, was later convicted for racketeering, money laundering and securities fraud.

Selling nearly 10 million shares for a dime apiece, Comparator raised $800,000, enough to pay deferred salaries, settle debts and put a little in the bank.

David Willock, a Los Angeles businessman who prints annual reports, remembers calling on Comparator back in the early ‘80s. Entering Comparator’s office on the eighth floor of a Long Beach high-rise apartment, Willock saw a couple of chairs, desks and a single black box placed on top of a coffee table.

The shoebox-sized device was Comparator’s lifework, a patented instrument that was intended to verify a person’s identity by scanning a fingerprint and matching it with prints in a file. Hearing promises of its future from Comparator’s officers, Willock says, he left that day having bought 2,000 shares.

But over the next few years, Comparator failed to make any significant sale. In the first of many misleading announcements the company would make, Comparator in mid-1982 said--falsely, it turned out--that it had a $3-million deal with several African countries, according to court records and interviews.

The company’s chairman had a heart attack in the early 1980s, and after a parade of departed executives, Rogers arrived in 1983, fresh from running a metals refining research firm. By then, Rogers, a pale man whose resume included a college professorship, had already been reprimanded by stock regulators for issuing unregistered securities.

But he was beginning a new era--and so was Comparator.

Rogers quickly hired Hitt, a former gunnery sergeant and private investigator. Hitt’s title was vice president, and his then-wife, Kay Churchill, acknowledges that she “came along as extra baggage,” to answer telephones and clean the office.

Churchill has emerged as the SEC’s key witness. Her testimony spans nearly 200 pages in SEC transcripts, and it is filled with accusations about illegally issued stock, secret meetings with stock promoters at a Marie Callender’s restaurant in Carlsbad, and feeding frenzies for the cash that came in from the company’s incessant private stock offerings.

In an interview, she said the company kept what it called the “critical list,” a ledger on which employees would enter their monthly bills and personal debts. Those whose needs were most desperate, she said, were first to receive the cash.

In many respects, Churchill should know the operations of Comparator as well as anyone. She was the company’s corporate secretary, which means she handled most of the paperwork related to the stock, and SEC officials say they believe her testimony.

But Churchill, 49, also raises a number of problems for the SEC. She was fired from Comparator about two years ago after being accused of embezzling about $800,000 in cash and stock, which she denies. Since then, she has changed her name to Summer Rayne Wolf and appeared in a porno movie and adult magazines.

“I’m embarrassed,” Churchill said. “But I had to do something to survive. I was in desperate needs and I had the sum of $1 left in my wallet.”

In her SEC testimony, Churchill says that Comparator was nothing more than a vehicle for fraud, and that Rogers often told employees that “If we stay on Nasdaq, we can run the stock up, we’ll all be millionaires.”

Churchill now lives in North Carolina and said she has quit pornography to go to school to become a medical technician, and that she has filed for bankruptcy.

Rogers says that Churchill is a thief who is feeding the SEC lies because she would like to destroy his company.

“I have no reason to lie,” Churchill said. “And I would have kept my mouth shut, but they brought this on themselves.”

From 1984 to 1986, Comparator’s debts ballooned to almost $2 million, and its lightly traded stock dropped to a low of a penny. During those three years, the company failed to produce annual financial reports to the SEC, as required by law.

But in 1987, Rogers hired a former SEC commissioner to straighten out the books, and launched a refinancing effort that wiped out $1.7 million in debt and raised another $1 million in cash.

When the deal was done, outstanding stock had ballooned from 50 million shares to 250 million. The company had discovered a way to keep itself going, and over the next nine years Comparator would continue to issue shares at a blistering pace.

By 1990, the company had issued an additional 300 million shares to investors, employees and even a Newport Beach dentist, according to company filings and interviews.

“Would you be interested in taking stock in lieu of cash?” was how Rogers proposed to pay Dr. Richard Forehan, who fixed the teeth of several Comparator executives.

“They all had bad teeth,” Forehan said.

Those who know Rogers say he always tried to project an air of confidence and erudition, often dropping the names of regal acquaintances and telling tales about his world travels. In Forehan’s chair, he related a trip to Russia.

“He talked about how he and Hitt were in a steam room with [then-Soviet President Leonid] Brezhnev’s finance man, beating each other with olive leaves and drinking vodka,” Forehan said.

Rogers said his fascination with the exotic stems from a childhood desire to explore the world outside his home town of Oak Park, Ill. At Comparator, he used tales of his travels and encounters to help pitch the company. Company documents refer to meetings with the president of Turkey and the prime minister of Malaysia. He enlisted as an honorary chairman of the company former U.S. Ambassador to Italy Maxwell M. Rabb.

Rogers said in an interview that he even enticed a Yugoslavian prince, Andrej Karageorgevitch, who had taken up residence in Palm Springs, to invest in the company and become its head of international sales. In one of the more mysterious developments surrounding Comparator, Karageorgevitch died of an apparent suicide by asphyxiation in a company garage in 1990.

In sworn testimony, Churchill claims that company officials later forged the prince’s name and cleaned out his checking account. Rogers said that is not true, and insists there was no foul play.

“He was my dearest friend,” Rogers said.

Rogers, who owns about 12% of Comparator’s 610 million shares of stock, is also a devotee of est, a controversial self-awareness movement that gained prominence in the 1970s. Rogers encouraged employees to attend est seminars, and some say his disarmingly confident manner, and habit of smiling broadly, reflect the movement’s teachings.

Forehan was won over by Rogers’ charms, and agreed to accept 5 million shares of Comparator for $75,000 worth of dental work. But after a while, Forehan said he tired of Rogers’ promises that the company’s success was just around the corner, and he said he came to see Rogers as little more than “a used car salesman.”

Comparator appears to have undergone a dramatic transformation about 1990, just as the company was securing a coveted listing on the Nasdaq stock market, a crucial move that would put the company’s name in the business pages of daily newspapers and grant access to legions of new investors.

Comparator joined Nasdaq just in the nick of time, applying for a listing in January 1990, just one month before Nasdaq moved to stiffen its listing requirements to levels that would have made Comparator ineligible. Once in the door, the company appears to have done everything it could to stay there.

One part of its strategy, according to the SEC, was to vastly overstate the value of its assets in an effort to remain above the minimum requirements set by Nasdaq, a stock market address that many investors see as a sign of respectability.

“I would have never bought if [Comparator] weren’t on Nasdaq,” said Ralph O’Hara, a 64-year-old Sylmar resident who bought 200 shares at $1.50 apiece during the stock run-up in early May, only to watch the value plunge before trading was halted.

Taking advantage of its Nasdaq listing, the company continued to issue millions of shares each month. To keep investors buying stock in a company that has never reported a profit and rarely had a sale, Comparator issued a steady stream of press releases touting new deals, new products and new financing, much of which never materialized.

In 1992, for instance, Comparator announced the acquisition of Largo Vista, an Orange County company engaged in real estate development in China. But in a recent interview, Rogers said nothing came of the deal.

By the early 1990s, however, the company’s technology was said to be lagging badly, so Rogers arranged a meeting with a professor in Scotland to examine a device developed at the University of Edinburgh.

The professor, Peter Denyer, agreed to loan his device to Rogers, who promised to find a market for it in the United States. But the SEC alleges that once Comparator had gained hold of the device, the company marketed it as its own technology, covered by Comparator patents.

In testimony for the SEC, Denyer said that Comparator ignored his repeated demands to have the device returned, and that he recognized his device as one that Comparator called its own in product videotapes.

Denyer said in an interview that after his initial meetings with Rogers, he never again heard from anyone at Comparator until his device was mailed back to him years later, along with a small amount of money and a brief apology.

In early 1993, Comparator’s path crossed with La Jolla Capital, a small brokerage that specializes in low-priced stock.

Harold B. Gallison Sr., who with his son and an attorney founded the brokerage in 1992, said Comparator was one of some 20 companies that held presentations at a spring retreat in Lake Tahoe. The retreat was intended to acquaint La Jolla Capital’s brokers with new companies, and they were quickly impressed by Comparator after they were asked to run their fingers in the identification machine.

Over the next three years, La Jolla Capital sold tens of millions of shares of Comparator stock to at least 600 clients, said Gallison, who added, “We did nothing wrong.”

The brokerage’s leading trader in Comparator was Bill Coogle, who, along with other La Jolla Capital brokers, has been accused in a civil suit by investors of zealously promoting the company’s stock.

In a signed statement filed in court, San Diego businessman Tom Regos said Coogle called him repeatedly in the weeks before the stock’s sudden run-up.

Regos said that Coogle “assured me that Comparator’s stock would increase in value because it had a great new fingerprint identification device and that MasterCard was in negotiations with Comparator to purchase the technology.”

Coogle, 34, who works out of La Jolla’s Georgia office, in interviews and court papers insisted that he never contacted Regos. “I’ve made my clients millions,” he said.

Coogle declined to say how much he earned in commissions for trading Comparator, but he said it was enough to buy a new car--and more.

But long-time investors of Comparator--including the many people who accepted company stock in exchange for services--weren’t so lucky.

Winfield Salisbury, a physicist, was one of the scientists hired by Rogers. Salisbury flew to Malaysia and lingered there for months waiting for his lab to open. But it never did.

For his services, Salisbury received about 900,000 shares of stock. But now 92, Salisbury had long given up on the stock ever going anywhere. And when the stock surged, he and his family missed the window to cash out.

“I’ve always felt they had a good product if they could get it going, but there seems to be one problem after another,” said Johanna Salisbury, who is taking care of her father in Phoenix. “This whole thing is bewildering.”

To some, one of the most troubling aspects of the Comparator story is that there were so many red flags raised throughout the company’s history. Yet regulators failed to act until the stock price run-up that cost investors millions of dollars.

“It’s a big stock market with thousands of listed companies,” explained Richard Sauer, the SEC’s lead investigator in the case. “There are a limited number of investigators and there has to be a prioritizing of every company we look at.

Even as the SEC proceeds with its civil suit against Comparator, investigators continue to search for answers to such basic questions as what started the trading frenzy and whether any Comparator insiders profited from it.

Rogers, who once helped edit a book published in 1979 titled “The Book on Offshore Wealth,” insists none of the company’s executives sold any Comparator shares during the frenzy.

He acknowledges that he transferred millions of shares of Comparator stock in a number of Nevada-registered companies that he controls, but he says he did so to protect the shares from lawsuits.

In fact, Rogers denies any wrongdoing, and believes that his company’s newest device, unveiled at an Atlanta trade show last month, will prove critics wrong.

“You’ll see,” he said in a recent interview. “I’m betting my career on it.”

In the meantime, Comparator’s stock remains frozen at 56 cents per share, and thousands of investors are waiting to see what will happen when trading resumes, if it ever does.

Times researcher Sheila A. Kern contributed to this report.