When a former chairman of the Joint Chiefs of Staff, a former World Bank president and a former assistant secretary of the interior are appointed to a company’s board of directors on the same day, people who invest in the stock market tend to notice.
The company was LaserLock Technologies, a Washington, D.C.-based firm offering a variety of anti-counterfeiting solutions. Its stock had been trading for a measly dime a share when, on Jan. 23, 2013, it announced the arrival of its marquee directors. Heading the six-person list was retired Marine General Peter Pace, a chairman of the Joint Chiefs of Staff under President George W. Bush. Paul Wolfowitz, a former World Bank president and former deputy secretary of defense under Bush, also joined the board.
Then there was Connie Harriman-Whitfield. A lawyer, lobbyist, former assistant interior secretary and former U.S. Export-Import Bank director, Harriman has one more card in her deck. Her husband is Ed Whitfield, a 20-year Republican Congressman from Kentucky’s First District.
Within a month of their appointments, LaserLock shares heated up. On Feb. 15, 2013, the stock price touched 50 cents a share, a fivefold increase in less than a month. LaserLock touted itself as a “global leader in providing state-of-the-art authentication solutions to pharmaceuticals, high-end retailers, casinos and governments.”
The higher the stock price, the greater the compensation potential for LaserLock’s new directors. Like her new colleagues, Harriman-Whitfield received options to buy 2 million shares for a nickel apiece. On the day the stock price hit 50 cents, her options were momentarily worth $900,000.
Sales were meager, though. For all of 2013, LaserLock chalked up $3,140 in revenue and a $16 million net loss. It needed help.
To the rescue came Congressman Whitfield. On April 25, 2013, his House Energy & Commerce Committee held a hearing on a bill calling for the Safeguarding America’s Pharmaceuticals Act. Whitfield spoke of attending a forum where he heard about the rise of counterfeit prescription drugs. He then proffered a 10-page written statement “from a company called LaserLock.” In it, company President Neil Alpert says LaserLock, “like so many of history’s great companies,” has evolved over time and is considered a “leader” in the anti-counterfeiting of products and packaging.
The statement was entered into the hearing record. Whitfield did not disclose in open testimony that his wife was a LaserLock director or that the forum was sponsored by LaserLock.
No reporter wrote about the matter until Republic Report unearthed it in November 2014. Whitfield did not respond for that story, but two days later CQ Roll Call quoted him as saying he hadn’t given “any thought” to disclosing his wife’s role as a LaserLock insider. He was also quoted as saying, “my wife did have some involvement with them, but she has no stock in the company and is not involved in it today.”
To the contrary, Securities & Exchange Commission filings indicate that Harriman-Whitfield was still a company director and stockholder when Rep. Whitfield spoke to CQ Roll Call. According to LaserLock’s annual report for 2014, filed with the SEC on April 16, Harriman-Whitfield had 333,333 LaserLock shares as of Dec. 31. Moreover, she still had the options to buy 2 million more.
In a recent conversation with the Kentucky Center for Investigative Reporting, Whitfield spokesman Marty Irby said he could not explain the discrepancy. He said he would “ask about it,” but never called back or responded to a follow-up e-mail.
Whitfield is currently under scrutiny for his cozy connections to his wife’s professional lobbying. A congressional ethics committee is examining whether or not he violated House rules by allowing his office to work on behalf of his wife’s employer, The Humane Society of the United States.
That matter wouldn’t serve as the only instance of dubious links between Whitfield and a lobbyist. Last summer, the Kentucky Center for Investigative Reporting found that Whitfield, his wife and another lobbyist, Juanita Duggan, had a longstanding financial partnership and joint ownership in property at a West Virginia luxury resort.
(Read “How a Congressman, His Wife and a Lobbyist Mixed Politics, Personal Finances“)
The KyCIR investigation found that both Harriman-Whitfield and Duggan lobbied for clients that had legislative business before Whitfield in Congress. While Duggan was involved with them, those clients and the trade associations she worked for donated more than $300,000 to his political campaigns.
In any case, Whitfield’s Capitol Hill assist for LaserLock was to no avail. LaserLock did not win a federal contract to set the technological standard for protecting prescription drugs from piracy. Investor interest fizzled. LaserLock shares ended 2013 at 7 cents a share.
Others soured on LaserLock, too. In February 2014, the company said Gen. Pace, Wolfowitz and two other directors had resigned from the board.
By the end of 2014, LaserLock was on its last legs. In its annual report, it said it has defaulted on seven notes payable with a combined balance due of $773,000 as of Dec. 31. Its independent auditor, Morison Cogen LLP, rendered the opinion that LaserLock’s “significant” losses and negative cash flow “raise substantial doubt about the company’s ability to continue as a going concern.”
Harriman-Whitfield finally threw in the towel herself. This year she informed the company that her two-year stint as a director expired Feb. 21 and that she would not stand for re-election.
And the value of her holdings? As of Monday’s close in the Over-the-Counter market, LaserLock shares were worth a penny apiece. Her stock options are underwater. She did not return phone calls seeking comment.
Reporter James McNair can be reached at firstname.lastname@example.org and (502) 815-6543.