Uni-Pixel Settles Civil Charges With The SEC After Former Chairman Enters Into Deferred Prosecution Agreement
By: James W. Kraus
The government’s investigation of public statements about product development by Uni-Pixel, Inc., has culminated in the settlement of potential criminal charges against its former Chairman and civil charges against the company. Civil litigation against two former executives will continue. On Wednesday, the SEC filed civil charges in the U.S. District Court for the Southern District of Texas against Uni-Pixel, its former CEO, Reed Killion, and former CFO, Jeffrey Tomz. On that that same day, Uni-Pixel agreed to pay $750,000 to settle charges against the company that it mislead investors about production status and sales agreements for a key product.
In the civil complaint, the SEC alleged that Uni-Pixel, a manufacturer of engineered films used to enhance and protect electronic product touchscreens, began publicly touting sales of a touch screen sensor product supposedly in speedy high-volume commercial production. According to the SEC, however, at the time of that announcement only a few samples had been manually completed. The SEC focused its complaint on several public announcements by Uni-Pixel during 2012 and 2013, including the following:
- The announcements in 2012 and 2013 that Uni-Pixel had entered into “multi-million dollar” sales agreements, without mentioning the material conditions the company would have to meet in order to actually receive those revenues.
- The announcement in April 2013 that Uni-Pixel’s high volume production line was “qualified and production ready” and its capacity “started at 50s moving to 100s and then 1000s over the next several months,” when at the time it had yet to produce any functional sensors through the high-speed process.
- The announcement in a November 2013 press release of a “purchase order” for its sensors that expected to ship an initial “commercial run” of sensors by year end. With the announcement, Uni-Pixel concealed that the order referred to in the release was for a mere $10 worth of sensors for the customer to review as samples.
The government asserted that those misrepresentations caused Uni-Pixel’s stock price to more than double. As a result of the movement of the stock price, Killion and Tomz made more than $2 million in personal profits from selling their own shares of company stock. The complaint alleges that both Killion and Tomz knew the company’s statements were untrue and that Uni-Pixel’s manufacturing process was still incapable of mass producing commercial quantities of sensors.
In a related matter, the company’s former board chairman, Bernard T. Marren, entered into a deferred prosecution agreement. The agreement alleged that Mr. Marren became aware that the information in Uni-Pixel’s press releases was inaccurate but failed to ensure that the company corrected the releases. Under the agreement, he is required to cooperate with the SEC’s continuing case, while complying with certain undertakings in order to avoid civil charges against him.
The case against Killion and Tomz continues as a civil matter in the United States District Court for the Southern District of Texas. In settling the civil charges against it, Uni-Pixel consented to entry of a final judgment, including a permanent injunction against violations of the Securities Act of 1933 and the Securities and Exchange Act of 1934. Under the terms of the settlement, which is subject to court approval, Uni-Pixel neither admitted nor denied the SEC’s charges.