Secord Firm Files Report Late After Losing Auditor
By Michael Barbaro
Washington Post Staff Writer
Thursday, February 20, 2003; Page E05
Three months after a federal grand jury subpoenaed Iran-contra figure Richard V. Secord in an investigation of possible insider trading, the Oregon medical-imaging company he heads lost its independent auditor and missed the deadline for filing its required quarterly financial report.
Computerized Thermal Imaging Inc. said the auditor, Deloitte & Touche LLP, quit Feb. 4, forcing the company to ask the Securities and Exchange Commission for more time to prepare its fourth-quarter earnings report. The company hired HJ & Associates LLC to replace Deloitte & Touche. Yesterday, CTI filed the documents five days late.
CTI attracted regulators' notice when Secord sold more than 100,000 shares in the company Dec. 9 and 10. Soon afterward, the company's stock price fell 63 percent after a Food and Drug Administration advisory panel recommended against approving CTI's breast-cancer detection system.
Secord bought back the shares only a week later. A securities law forbids profiting from such rapid selling and buying. Secord earned $98,734 from the transactions, according to securities filings.
Neither Secord nor his lawyer could be reached for comment yesterday. CTI's chief financial officer, Bernard J. Brady, declined to comment on the grand jury investigation, which began in mid-December.
"We're strained right now," Brady said. "Is the company recoverable? I think so."
Before it pulled out Feb. 4, Deloitte & Touche raised substantial doubt about CTI's ability to continue as a going concern in its report for the year that ended June 30, 2002. Among other things, the auditor cited recurring losses, negative cash flow from operations and pending class-action lawsuits from shareholders, according to company filings. At the end of the fourth quarter, CTI said its cash and marketable securities would only fund operations for five months. Its stock, which traded as high as $19 in March 2000, closed yesterday at 11 cents.
Secord pleaded guilty in 1989 to lying to Congress about his role in the Iran-contra affair, in which Reagan administration officials arranged arms shipments to Nicaraguan rebels and to Iran. The plea was expunged in 2000.
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