No Major Fine for Comparator, SEC Says

The Securities and Exchange Commission on Thursday said it meted out no fines or major penalties against Comparator Systems Corp., the fingerprint technology firm embroiled in a major stock market scandal last spring, because there was no money left to recover and no stronger punishment to pursue.

“What we have obtained here is all the relief we could get,” said Chris Mixter, the SEC’s lead attorney in the case. “I don’t think there was a firmer resolution to be had.”

Newport Beach-based Comparator was dealt only minor penalties in its settlement of an SEC lawsuit that accused the company of fraud and theft.

Under the terms of the agreement, two of the company’s top executives, Chief Executive Robert Reed Rogers and Vice President Gregory Armijo, agreed never to serve as officers or directors of any public company. But the two are allowed to continue to serve temporarily as consultants to Comparator, a maker of electronic fingerprint scanning devices.

The settlement surprised many, given that the SEC had moved so swiftly and aggressively against the company after it set three trading records on the Nasdaq stock market and soared thirtyfold in value in early May before collapsing under the scrutiny of market regulators.

Mixter said Comparator’s meager financial resources left little chance of recovering investors’ losses and acknowledged that the SEC’s enforcement authority is limited.

“We don’t have criminal authority and so what we do get are injunctions and money penalties,” Mixter said. “The company effectively had no assets and there is nothing to suggest the company is in a position to pay any meaningful penalty.”

The SEC is able to refer cases to the U.S. attorney’s office, which can pursue criminal charges, but Mixter declined to say whether the agency had taken that step.

He pointed out that the settlement leaves open the possibility that Rogers and Armijo--whose assets remain frozen--could still face fines. But the executives’ attorney said that possibility is remote. “We will be submitting financial information which will show their inability to pay,” said attorney Gerald E. Boltz.

The SEC also said Thursday that it has issued an order barring Comparator’s former auditor, Eli Buchalter Accountancy Corp. of Los Angeles, from ever serving as an auditor for any public company. Buchalter had routinely approved Comparator’s assets and balance sheets, which the SEC said were fabricated and inflated.

The SEC swooped in on Comparator in May after the company’s stock run-up. In a sweeping lawsuit, the SEC accused Comparator of lying about its finances to protect its Nasdaq stock listing, stealing its technology from a Scottish professor and cheating investors by issuing hundreds of millions of shares of worthless stock.

Indeed, Comparator had never posted a profit in its 17 years as a public company, but by May the 30-employee firm had issued 610 million shares of stock, more than corporate giants such as Microsoft Corp.

Some said the company’s stock price run-up was fueled by touting on the Internet. The company has since been delisted by the Nasdaq market. Today, its stock still trades for pennies per share in private, off-market transactions.