Fraud conviction stands, but $13m penalty to be reevaluated for ex-Heart Tronics exec Stein

A federal appeals court this week ruled that a $13.2 million penalty against former Heart Tronics CEO Mitchell Stein should be reevaluated, but upheld an associated fraud conviction.

Stein was convicted in May 2013 of 14 charges of fraudulently inflating share prices for heart monitoring devices maker Signalife, later known as Heart Tronics.

The US Court of Appeals for the 11th Circuit this week upheld the fraud convictions, but vacated the $13.2 million penalty with “instructions to calculate anew the amount of loss,” according to court documents.

Last April, former co-chief exec officer and ex-NFL wide receiver Willie Gault was ordered to pay $206,571 to settle an SEC suit over his role in the inflation scheme.

The fines included a $78,000 civil fine and an additional $101,000 in ill-gotten gains, plus $27,571 in interest. Gault was also banned from being an officer or director of public companies.

A jury in March cleared Gault of intentionally defrauding investors, but found him liable for filing false certifications with the SEC and circumventing the company’s internal controls.

In June 2014, a California District Judge harshly refused Stein’s motion for a retrial, taking offense to the request itself.

Stein had been petitioning for a retrial since at least September 2013, filing several motions, all of which were summarily dismissed by Judge Kenneth Marra.

“The Court finds these motions not only to be baseless, but also offensive,” Marra wrote in his ruling. “There was more than sufficient evidence presented upon which a reasonable jury could find, beyond a reasonable doubt, that Defendant was guilty.”

Marra further denied Stein’s request to compel prosecutors to produce documents and meeting minutes of grand jury proceedings, as well as Stein’s motion for conditional release pending sentencing, according to court documents.

Material from Reuters was used in this report.

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