The SEC stormed Hollywood and brought down a high-profile series of pump-and-dump schemes involving a purported heart monitoring device company and six individuals.  Among those charged are a former pro football player, a Hollywood talent agent, and an attorney who masterminded the scheme. Players. It's alleged that the company, Heart Tronics, installed former NFL star Willie Gault as a figurehead co-CEO, along with former Hollywood exec J. Rowland Perkins, to create a buzz and foster investor confidence.  Behind the scenes, CA-based attorney Mitchell Stein controlled most of the company’s business activities - hiring Internet promoters and reaping nearly $8 million from secret trades he orchestrated unbeknownst to investors. In a parallel criminal investigation, the U.S. Department of Justice today announced the arrest of Stein. In addition to Heart Tronics, Stein, Gault and Perkins, 3 others were charged with participating in the scheme, including:  Stein’s chauffer and handyman Martin Carter of Boca Raton;  stock promoter Ryan Rauch of San Clemente, CA;  Mark Nevdahl of Spokane, WA., the trustee and stockbroker for a number of nominee accounts Stein used to unlawfully sell Heart Tronics stock. SEC Findings and Allegations. Gault and Perkins rarely questioned Stein’s fraudulent agenda and abdicated their fiduciary responsibilities under the Sarbanes-Oxley Act.  Stein and Gault together defrauded one investor into making a substantial investment in Heart Tronics, misrepresenting to him that his money would fund the company’s operations.  Instead, the pair diverted the investor’s proceeds for personal use, including the purchase of Heart Tronics stock in Gault’s personal brokerage account “Catch 83” - which served to create the false appearance of volume and investor demand for the stock. Heart Tronics was known as “Signalife” during most of the scheme’s time period, which ran from December 2005 to December 2008.  Heart Tronics common stock was formerly listed on the Amex but is now quoted on the OTC Link under the symbol HRTT.PK. Heart Tronics allegedly fraudulently and repeatedly announced millions of dollars in sales orders for its product between 2006 and 2008.  To the contrary, the company never had viable sales orders from actual customers.  Stein and Carter fabricated numerous documents to support the false disclosures to the public, going so far as to have Carter make a one-day round-trip to Japan at Stein’s direction to mail back a letter from a fictitious customer in order to deceive management, disclosure counsel, and auditors. Stein Spreads Misinformation. Stein had products shipped to one of Carter’s friends to create the illusion that the company was delivering a heart monitoring device to a bona fide customer. Stein caused Heart Tronics to unlawfully pay Carter about $2 million in cash and Heart Tronics stock in a sham consulting agreement - nearly all of which Carter funneled back to Stein. Stein allegedly hired Rauch to solicit numerous investment advisers, retail and institutional brokers, and other investors to buy Heart Tronics stock.  Rauch never disclosed that he was being paid by Heart Tronics in exchange for promoting company stock to investors. Stein's wife - the company’s majority shareholder - directed the sale of more than $5.8mn worth of Heart Tronics stock while failing to disclose the sales as required under federal securities laws. Stein enlisted Nevdahl to serve as trustee for a number of purportedly blind trusts to create the façade that the shares were under the control of an independent trustee. The trusts were blind in name only, and Nevdahl met Stein and his wife’s regular demands for cash by continually selling Heart Tronics stock though the trusts. SEC Charges. The defendants were charged with violating various federal securities laws.  The SEC seeks, among other sanctions, disgorgement of ill-gotten gains with prejudgment interest, financial penalties, and permanent injunctive relief.  The SEC’s complaint also seeks to disgorge ill-gotten gains from 9 relief defendants including Stein’s wife Tracey Hampton-Stein and her company ARC Finance Group LLC, which is the majority shareholder of Heart Tronics. SEC Staff Credits. Investigation by Adam Eisner, Rachel Nonaka;  supervised by  Charles Cain.  Litigation will be headed by Mark Lanpher. For further details, go to:  [SEC PR 11-271, 12/20/11]   and   [SEC Complaint].