TBO.com - TBO is Tampa Bay Online

SEC Lawsuit Claims Stun Gun Maker Committed Fraud

ADVERTISEMENT

By RUSSELL RAY, The Tampa Tribune

Published: January 30, 2008

TAMPA - The Securities and Exchange Commission said Tuesday that Tampa-based Stinger Systems, which markets stun guns to law enforcement agencies, and its chief executive officer, Robert Gruder, misled investors about one of the company's products.

In a civil lawsuit filed Monday in U.S. District Court in Atlanta, the SEC claims Stinger, which went public in 2004, made a series of false claims that led investors to buy the stock and inflate the share price.

Specifically, Stinger misled investors when it claimed that its stun gun was certified by the Bureau of Alcohol, Tobacco and Firearms, the SEC suit states. Stinger also falsely claimed the company's shares were traded on the Nasdaq Stock Market, the SEC said. The suit alleges the company told investors the gun was in production and ready to be sold and distributed when, in fact, manufacturing hadn't begun.

Shares in the company fell 86 cents, or 59.3 percent, to 59 cents.

Gruder, the company's largest shareholder with more than 5 million shares, did not return phone calls seeking comment Tuesday. But in a prepared statement, he said the allegations are not related to the company's current stun gun product.

"I do not believe I committed securities fraud," he said. "In fact, I have invested approximately $1.5 million of my own money to keep Stinger Systems going through tough times, which I believe demonstrates my faith in the company and its products."

The company's claims caused shares in Stinger, which trade on the over-the-counter market, to rise 340 percent to $5.50 on their first day of trading in November 2004, the suit states.

The stock hit an all-time high of $48.55 a share in January 2005, about the time the company's product claims were reaching law enforcement officials through advertisements in trade publications, the SEC says in its lawsuit.

The SEC wants Gruder, 48, fined and a court injunction banning the company from making the claims, and other business practices the agency said were questionable. The agency is also asking the court to consider prohibiting Gruder from serving as an executive or director of a publicly traded company. Stinger reported a loss of $6.3 million in 2006, according to the SEC.

Reporter Russell Ray can be reached at rray@tampatrib.com or (813) 259-7870.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT