Federal regulators filed fraud charges in Massachusetts Monday against a Boston company that purportedly developed a machine to use radiation to kill dangerous biological agents, such as anthrax, sent through the mail.
In court documents, the Securities and Exchange Commission accused Bio Defense Corp. and several key executives with misleading investors while raising at least $26 million.
Specifically, the SEC said the company falsely told investors that the company paid its employees and officers little cash, but instead employees were toiling solely or mainly for “sweat equity” shares that might later become valuable if the company went public or became profitable.
In reality, the SEC said, the company’s largest expense was payments to employees, including $1 million in 2004 alone. Much of the company’s money also went to pay high-pressure sales firms, known as “boiler rooms,” that were hawking securities to overseas investors.
In addition to Bio Defense, the SEC also filed charges against the founder and former chief executive, Michael Lu of Lexington; Jonathan Morrone, a former senior executive vice president from Newton; Z. Paul Jurberg, a senior officer from Brookline; Anthony Orth, a former vice president from Tustin, Calif; and Brett Hamburger, a consultant from of Delray Beach, Fla., who helped the company raise money. Lawyers for the defendants declined comment or could not immediately be reached late Monday.