TO: SEC Enforcement Division
SUBJECT: Zitel Corp. (Nasdaq: ZITL) False and misleading Press Release (11/26/97)
On November 13, 1997, Zitel CEO Jack King sold 60,000 shares of Zitel stock. The disclosure of this sale had an immediate and adverse impact on the Company's stock. On November 26, 1997, in an effort to stop the sell-off in the Company's stock, Zitel released the following press release with apparently false and misleading statements:
biz.yahoo.com
The press release implies that Mr. King did not receive any proceeds from the sale, other than to pay taxes and transactions costs. This is FALSE based upon information that is available in the public record. In fact, Mr. King realized approximately Two Hundred Thousand Dollars ($200,000) in after tax income from this transaction. This is in addition to increasing his tax basis in the remaining 40,000 shares. The press release contains the following statement: "The net result of the transaction was an increase in Mr. King's direct holdings by 40,000 shares, to 345,846." This statement is FALSE. This is NOT the net result of the transaction and only represents a portion of the benefits and proceeds received by Mr. King.
This is an extremely important issue to all investors in Zitel. During the Company's conference call in July, in the face of mounting criticism concerning Zitel's failure to receive any Year 2000 contracts, Mr. King stated that he would not sell any of his shares. Just a few months later, Mr. King sold a significant number of shares and then apparently misrepresented the transaction to boost the stock price. Zitel's stock was up 8% today, apparently reacting to this press release. |
