Mitchell Stein, the ex-outside counsel for Signalife (later Heart Tronics), was convicted in May on 14 charges that he masterminded a 5-year fraud scheme to pump up the heart monitoring device company’s share price. Now federal prosecutors want him to cough up not only his ill-gotten gains, but the loot taken by his ex-chauffeur co-conspirator.
The scheme eventually ensnared alleged co-conspirator Willie Gault, the ex-Chicago Bears and track star who became the co-CEO of Heart Tronics in 2008.
Stein and handyman/chauffeur Martin Carter, who pleaded guilty in 2011, personally reaped a total of nearly $5.4 million from the scheme, in which they set up a series of sham transactions and entities to bilk investors, according to court documents. In 1 instance, prosecutors said, Carter set up a brokerage account from which he sold more than $1 million worth of Signalife stock and transferred the proceeds to Stein.
Carter, who was at times listed as Signalife’s chief technology officer or as a "consultant," in another case inked a deal with Stein to be paid $680,000 in cash and several million Signalife shares "purportedly for various consulting services regarding Signalife products," according to the documents. Carter then sent $1.5 million back to Stein, including most of the cash and proceeds from stock sales, prosecutors alleged.
Now the feds want Stein to cough up not only his own $3.2 million stash but the nearly $2.2 million Carter pulled down in the scheme.
The SEC charged Gault in the scheme in late 2011, accusing the NFL great of signing off on falsified financial statements and failing to question Stein about the company, according to the New Jersey Star-Ledger.
Gault’s lawyer denied the charges, saying Gault "did nothing wrong and never made money from the company," the newspaper reported.
"He didn’t try to deceive anybody. He tried to save lives," the lawyer said.