Embattled Imaging Diagnostic Systems Inc. (OTC:IMDS) closed the books on an SEC investigation with the resignations of CEO Linda Grable and CFO and executive vice president Allan Schwartz, the company announced today.
Linda Grable, wife of company co-founder Richard Grable, was on the board of directors since the company’s inception until April 2004. She also held the corner office from August 2001 until April 2004, according to SEC filings. She retains 51% of the company’s common stock, according to a July 2013 report.
IDSI handed the CEO position to Richard Grable Jr., son of Linda and Richard Grable. Grable Jr. was previously IDSI’s director of marketing from 2010 until 2013, according to company documents.
The device maker has yet to announce who will replace Schwartz as CFO.
The executive shuffle was prompted by a settlement with the SEC, which included injunctions preventing Linda Grable and Schwartz from service. The pair were accused of misleading investors and failing to remit payroll taxes to the Internal Revenue Service. Neither admitted any wrongdoing in the settlement with federal regulators.
The SEC accused IDS CEO Linda Grable and CFO Allan Schwartz of issuing meaningless timelines, thus misinforming investors of the company’s progress toward FDA review of its CTLM laser-based breast cancer detection systems. The CTLM or Computed Tomography Laser Mammography device uses lasers to evaluate blood flow to the breast, using increased blood flow as an indicator of newly forming tumors.
The device maker halted clinical trials in November 2008, the SEC said, because it was no longer able to pay its clinical sites. Schwartz was purportedly responsible for making those payments, and knew that progress would stop without funding.
"Nevertheless, Imaging continued to list the unrealistic and impossible deadlines in its public filings," according to the SEC lawsuit.
Grable and Schwartz settled with the SEC last week, agreeing to pay civil penalties of $150,000 apiece and to step down from their leadership roles and signed injunctions prohibiting them from serving as officers or directors of public companies.