SEC Files Lawsuit Against Company Led by Masry

A company developing an anti-pollution device for automobiles recently invited Thousand Oaks mayor and environmental crusader Ed Masry to become its chief executive.

He gladly accepted.

But the trial lawyer who gained fame after he was portrayed in the film “Erin Brockovich” is learning that the job entails more than he bargained for.

The Securities and Exchange Commission filed a lawsuit in U.S. District Court in New York this week alleging fraud and deception against Save the World Air Inc., its founder and former president Jeffrey Alan Muller and a consultant.

Masry is not named in the lawsuit, and said he had no knowledge of the depth of the company’s problems when he accepted the post in October. Still, he said he plans to remain on the job.

“I’m not just going to jump ship and abandon the company,” Masry said. “I’m not a quitter. I’m going to try to do the best we can to salvage these people’s investments.”

The civil action alleges that from February 1999 through April of this year, the defendants issued misleading and false promotional information that artificially raised the value of the company’s stock.

The company faces possible fines and may be forced to return millions of dollars to investors. In addition, the federal commission is seeking to bar Muller from serving as an officer or director of a public company, said Caren Pennington, an assistant regional director for the SEC in New York.

“We’re not saying in our complaint that they don’t have a real product,” Pennington said. “We’re saying they issued a lot of false and misleading statements about the company’s success and business potential.”

Muller, reached by telephone in Australia, said the SEC’s lawsuit has no merit.

“All the allegations, as far as I’m concerned, are totally false against myself,” he said. “We’ve proved the device works beyond any doubt. It’s not hype. It’s reality.”

He said he intends to file a countersuit. “I’ve done nothing wrong,” he said.

Masry said Muller sought him out several months ago, showing him various reports about the company’s “Zero Emission Fuel Saver” device. Masry knew when he signed on that the SEC had already suspended trading of the company’s stock, and that the action came after the company prematurely issued a press release about a relationship that it hoped to develop with Ford Motor Co. But Masry said he was assured by Muller that past mistakes in promoting the product were unintentional.

Masry accepted the job and even invested in the firm, although he declined to say how much. “I still believe in the product,” Masry said. “The problem isn’t the product, the problem is the people managing the product.”

“If this gets off the ground and this product does what we think it does, it’s a tremendous boon to the environment,” Masry said. “That’s why I accepted this position, because I thought we could do something for the environment. That hope hasn’t totally been lost, but since I came on in October and started putting light in all the corners, everything that looked like it was isn’t.”

Leodis C. Matthews, a Los Angeles attorney representing Save the World Air, said the company is cooperating with regulators and hopes that the change in management will convince authorities that the company is on the right track.

“Even before the complaint, the company has been in discussions with the SEC to resolve these issues,” Matthews said. “I’m pretty confident that we’re going to be able to resolve them with no penalties or sanctions against the company.”