Comparator Is Now Target of Federal Probe

Federal authorities have launched a criminal investigation into Comparator Systems Corp., the fingerprint technology firm whose stock soared and crashed two years ago.

The FBI and the U.S. attorney’s office in Los Angeles interviewed at least one former employee, and are poring over boxes of company information about securities deals, say the employee and federal sources.

Spokesmen for both agencies declined to comment. Executives at the company, which is inactive, weren’t available for comment.

Comparator was the target of a civil Securities and Exchange Commission investigation after its stock zoomed from pennies a share to $1.87 in three record days of Nasdaq trading in May 1996. The stock price crashed as abruptly, leaving investors with $2.9 million in losses.

The Comparator debacle gripped Wall Street and the investment community, as regulators held the company up as an example of penny-stock trading gone berserk. The scandal led to stricter listing requirements on Nasdaq and the creation of a special inspections office within the SEC.

In a 1996 lawsuit, the SEC accused the company of lying about its assets, but the agency closed its probe that September without levying fines or major penalties.

“I thought this whole issue was dead and gone,” said Summer Churchill, the former corporate secretary. “I was surprised to get the FBI’s call.”

Even a class-action lawsuit has been dropped because the company had no assets to liquidate, said Kirk Hulett, the plaintiff’s attorney. “It was a true tragedy,” he said, but the financial situation was such that there were no deep pockets to pursue for damages.

Investors at the time insisted that the company had got off lightly, and were angry that Comparator never paid any fines and continued to operate.

An official at the General Accounting Office, the investigative arm of Congress, said he knows about the probe “into allegations of wire and mail fraud,” but declined to comment further.

In January, Churchill said she was contacted by an FBI agent and asked to come to the agency’s offices in Santa Ana for questioning, said her attorney, Reg Fudge Jr.

Churchill said she, Fudge and her husband met with an FBI agent and an assistant U.S. attorney last month.

“Summer has cooperated fully and will continue to do so,” Fudge said. “The FBI was asking many of the same questions that the SEC was asking two years ago.”

During a three-hour FBI interview, Churchill said she was questioned about the company and its top executives.

“The agents kept wanting to know about how the company was selling stock--whether it was by phone or mail--and how they were using the Internet to promote the company’s stock,” Fudge said.

At the meeting, Churchill said she also gave investigators four boxes filled with documents: copies of checks from shareholders, stock transactions, written corporate communications and audio tape conversations among Comparator executives.

Fudge said that FBI officials insisted they would look through the documents, then contact him or Churchill to set up a second interview.

The company has been dormant in recent months. Comparator has no paid employees, is not selling products and does not have the ability to make any products, according to its most recent filing with the SEC.

It didn’t log any sales in the three months ended Sept. 30, during which it lost $152,154, according to unaudited financial reports. The company had $2,662 in cash on hand and only $36,156 in assets, but listed $4.2 million in liabilities.

Despite the lopsided balance sheet, the company said its directors believe that Comparator could resume operations if it could raise at least $500,000. However, there are significant unresolved legal issues over who owns the technology used in the fingerprint identification systems, making such a comeback highly unlikely.

The SEC lawsuit had accused the firm 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.

That probe relied heavily on the testimony of Churchill, whom Comparator executives accused of embezzling $800,000 in cash and stock. Churchill denied the allegations. Churchill has since changed her name to Summer Rayne Wolf.

In settling its suit, the SEC barred Comparator’s former chief executive, Robert Reed Rogers, and its former vice president, Gregory Armijo, from ever serving as officers or directors of a public company. Neither man admitted any wrongdoing, and neither could be reached for comment Monday.

Comparator now trades informally--and rarely--in over-the-counter transactions among broker-dealers for less than a penny a share.

The SEC said it is still pursuing a third former officer, Scott Hitt, who was once married to Churchill. He is believed to be running a saloon in Malaysia.

Though the SEC and Nasdaq changed policies in the wake of the Comparator scandal, the GAO said last month that the fiasco never should have happened.

In a report, the GAO criticized the agencies for being lax in their reviewing procedures and for failing to investigate the firm’s assets thoroughly. Comparator had lost money for nearly 20 years, the report noted, but survived by issuing 610 million shares, much of it to pay salaries and settle debts.