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SEC says Tampa firm lied about medical device

By Scott Barancik, Times Staff Writer
In print: Wednesday, April 23, 2008

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In the latest string of Tampa Bay area companies accused of stock fraud, Southwestern Medical Solutions Inc. appears on the wrong end of a Securities and Exchange Commission lawsuit.

According to a federal complaint filed last week, the Tampa-based company lied to the public in 2006 about LabGuard, a medical device that purportedly tests patients for infectious diseases.

In news releases, Southwestern claimed it was close to a patent, had FDA approval and received a large purchase order from a supplier. In reality, the SEC said, Southwestern had not applied for a patent or FDA approval, and got the purchase order a year earlier, on condition of that approval.

But the claims created substantial increases in Southwestern's stock price. Attempts to reach Lutz resident Richard R. Powell, 41, then-vice president for new product development and the only area person named in the suit, were unsuccessful Tuesday.

Unlike traditional pump-and-dump cases, the lawsuit did not accuse Southwestern executives of profiting by "dumping" shares. Peter Henning, a law professor at Wayne State University and former SEC lawyer, said it's possible the agency couldn't find proof of illegal trades. That could change as the suit progresses, he added.

Scott Barancik can be reached at barancik@sptimes.com.