A Medical Device Daily

The Securities and Exchange Commission reported that in March and April, the U.S. District Court for the Eastern District of New York entered final consent judgments against defendants Alfred Braunberger, Harry Masuda, Louis Matson, Hyperbaric Systems (Palo Alto, California) Larry Bryant, Comco (Costa Mesa, California) and Paul Marotta.

The judgments enjoin these defendants from future violations of the federal securities laws and require Masuda and Matson each to pay a $25,000 civil penalty, and Marotta to pay $50,328 in disgorgement and post-judgment interest.

The SEC complaint, filed in August 2002, alleged that issuers Intracom (Thousand Oaks, California), Hyperbaric and Surgica (El Dorado Hills, California); Braunberger, Masuda and Matson, the CEOs of Intracom, Hyperbaric, and Surgica, respectively; Marotta, the three issuers' lawyer; and Bryant and Comco, the issuers' stock promoter and his company, made material misrepresentations and omissions to investors about the anticipated use of offering proceeds.

According to the complaint, each issuer provided offering materials to investors that stated it would pay roughly 12% in sales commissions to brokers selling the securities and that the remaining funds will be used for corporate purposes.

The complaint further alleges that the issuers, with the knowledge of the CEOs and the issuers' lawyer, paid Bryant, who acted as an unregistered securities broker, undisclosed commissions of 25% to 30%, thereby substantially reducing the amount of funds available for business purposes.

Previously, in January 2007, defendant Surgica consented to a final judgment enjoining it from future violations of the federal securities laws and, in March 2007, a default judgment was entered against defendant Intracom corporation enjoining it from future violations of the federal securities laws.

In other legalities: NetClick Media reported halting an operation that offered "free trials" of its herbal products, including smoking cessation patches, pending trial.

The Federal Trade Commission sued, alleging that the trials weren't free, the patches didn't work as claimed, and the operation was illegally debiting consumers' bank accounts without their authorization. The defendants have agreed to abide by a court order that bars them from making deceptive claims, restricts their ability to dissipate assets, requires them to preserve records and other evidence, and account for the money they made from their venture.

The company advertises that consumers will only pay for shipping and handling with ads in large type that say "FREE 10-Day Supply plus shipping and handling," and "TRY IT FREE." Consumers who want to try the "free trial" provide a credit or debit card to pay for the shipping charge.

But, the FTC alleges that consumers weren't sent a 10-day trial-size package. They were sent a 30-day supply and had to pay for all 30 days of product if they chose to keep it. Consumers who chose to return the unused product paid postage and were assessed a $7.95 restocking fee, neither disclosed adequately by the sites.

The agency also alleged that the operators failed to disclose adequately that consumers who signed up for the free trial were agreeing to be enrolled in a continuity program and would be automatically billed monthly charges of up to $99.95 until they cancelled. But, the operators deliberately misled consumers into believing they would not be automatically enrolled.

The operators claimed that consumers "can cancel any future orders anytime, risk free in order to not incur any charges on future orders." But consumers found that canceling was difficult or impossible.

No trial date has yet been set.