Shareholders Zap Lightning Gun Maker

Investors in real-life lightning-gun maker Ionatron already have a big ol' reputation for hair-trigger tempers. But that anger isn't just reserved for reporters writing about the company. Sometimes, it spins back on Ionatron itself.

Last fall, a group of shareholders filed a class action lawsuit against the company and its directors. At the center of the suit is the company's Joint IED Neutralizer -- a bomb-zapper that Ionatron promised would be battlefield ready, ASAP. Later testing proved otherwise. The plaintiffs allege that Ionatron knew the thing was a dud, all along. In the words of the suit, "the Company concealed the fact that its much-heralded vehicle was at best an improvisation, incapable of meeting U.S. government specifications for successful field testing."

The suit is still ongoing -- motions were filed as recently as two weeks ago. But all the important documents in the case have been sealed, and the lawyers aren't talking. Still, you can get a sense from the original complaint, filed in U.S. District Court in Arizona, of what happens when you're unwise enough to cross an Ionatron investor.

*18. [Ionatron] conditioned the market for a major product deployment milestone, specifically the development of a field-deployable vehicle incorporating its counter-Improved Explosive Device (IED) technology, also known as the Joint IED Neutralizer or”JIN,” which it planned to sell to the U.S. government. *

19. Defendants’ press release of June 27, 2005 was false and misleading. In spite of the Company’s purported development of field deployable technology, the Company had concealed the fact their much-heralded vehicle was at best an improvisation of “off the shelf”
platforms and components, incapable of meeting U.S. Government specifications for successful field testing. As such, its purported efforts to demonstrate the vehicle as a prototype for a large order from the government would inevitably fail…

*21. [Regarding a press release on March 24, 2006 in which chairman Robert Howard announced his resignation]: While defendant’s press release appeared to signal to investors that a transition…was underway, in reality the Company was grappling with the truth about the failure of its “deployment-ready” technology. Worse, following his resignation but prior to defendants’ shocking disclosure, Howard had engaged in highly suspicious sales of over one million of his shares of
Ionatron, for proceeds of $13.5 million, while in possession of non-public material information about the program setbacks and failures. *

22. [From the May 10, 2006 First Quarter Financial Results]:
The U.S. Government customer concluded that the JIN counter IED
technology performed well and offers great promise, but determined that the current vehicle platform should be changed. The platforms for these preproduction JIN counter IED units were selected due to their off-the-shelf availability.

23. [Regarding the May 10 announcement]: On the shocking news of May 10, 2006, including the fact that the Company had done little more than improvise “off-the-shelf” vehicle platforms and components to
“develop” a “deployment-ready” prototype IED vehicle, the prince of
Ionatron shares plunged more than 39.5% over the four subsequent trading days…

Ionatron and its management -- current and former -- is no stranger to legal controversy, of course. New York Post columnist Christopher Byron called Iontraton founder Robert Howard "'a twice-fined Wall Street stock promoter'
who agreed to pay $2.9 million in penalties in 1997 in settlement of a
Securities and Exchange Commission suit charging him with making false and misleading statements about another company he founded and controlled, called Presstek, Inc." More recently, the family of former CEO Thomas Dearmin settled with the Securities and Exchange Commission over charges of insider trading.

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