A sharp jump in the stock price of Charleston medical device maker two years ago was triggered by a series of fraudulent statements from the company, federal regulators allege in a new lawsuit.
The U.S. Securities and Exchange Commission filed the complaint Friday in Atlanta naming Revolutions Medical Corp. and CEO Rondald L. Wheet of Mount Pleasant as the defendants.
The agency is seeking the return of any ill-gotten gains from the company and its top executive. It also wants an order barring Wheet from serving as an officer or director of a publicly traded U.S. business.
Wheet, who also is chairman of the company, could not be reached Monday. An attorney who has represented Revolutions Medical in other legal matters declined to comment.
The SEC is targeting written statements the small, publicly traded business distributed between August 2010 and July 2011 about the status of its main product, a retractable syringe that’s been in the development stage for years.
The agency cited a series of news releases “designed to convey the impression that, among other things,” the safety device was ready to be distributed and that the company “had entered into, or was on the cusp of entering into, mass distribution agreements, including a sales agreement with the U.S. Department of Defense.”
The complaint went on to say the misleading information caused the stock price to climb to as much $1.74 from 28 cents per share between Aug. 23, 2010, and Sept. 16, 2010.
The brief runup enabled Revolutions Medical to raise money more cheaply under a stock-for-cash financing arrangement it had with a Boston investment firm, the lawsuit states. The SEC estimated the local company raised about $1 million more than it would have had its stock price remained flat.
The agency also said the company and Wheet knew the RevVac syringe wasn’t approved to be sold during the period in question and that Revolutions Medical had no contract with the military.
As of July 2011, for instance, the U.S. Food and Drug Administration had not tested or validated the needles, the lawsuit states.
In June of that same year, small batches of the syringe had failed preliminary quality reviews “for myriad reasons and presented a potential health hazard if used,” according to the SEC.
Also, the company never had a sales agreement with the Pentagon as it suggested on Sept. 10, 2010, when it announced it was “to receive a contract with the U.S. Department of Defense HIV/AIDS Prevention Program” for multiple countries. That contract turned out to be preliminary approval of a $175,000 grant from the Navy, which later rescinded the offer, according to the lawsuit.
Formerly known as Maxxon Inc., Revolutions Medical is a penny stock and isn’t listed on any major exchanges. Its shares are bought and sold through OTC Market Group Inc.’s “OTCQB” trading platform under the symbol RMCP.
The stock, which ended Friday at 18.7 cents, closed at 16 cents Monday in heavier-than-usual trading.
Reach John McDermott at 937-5572.