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The fired former chief executive of Law Enforcement Associates, a maker of security gear for police and military customers worldwide, has claimed the Raleigh-based company violated U.S. export and insider trading laws, the company disclosed in an SEC filing.

Filing: Fired CEO claims NC security co. broke law

By Emery P. Dalesio

AP Business Writer

RALEIGH, N.C. —

The fired former chief executive of Law Enforcement Associates, a maker of security gear for police and military customers worldwide, has claimed the Raleigh-based company violated U.S. export and insider trading laws, the company disclosed in an SEC filing.

Law Enforcement Associates reported on the allegations in a filing Tuesday to the Securities and Exchange Commission and dismissed the claims as baseless. The company had fired Paul Feldman as CEO, president and treasurer in August, citing insubordination, poor performance and other issues. Feldman remains on the company's board of directors.

LEA said in its filing that it didn't believe Feldman's allegations and doesn't believe they "will have any material effect upon the financial statements or other information contained in its reports to the SEC."

"Nonetheless, in an abundance of caution, management has engaged separate independent legal counsel to conduct an investigation of all allegations and to defend the Company in these matters," LEA said in its SEC filing.

The maker of under-car inspection systems, explosive detection kits and other gear for police and military forces, is chaired by a powerful state senator, Democrat Tony Rand of Fayetteville.

LEA said Feldman's claims were contained in a Nov. 17 letter to the U.S. Labor Department's Occupational Safety & Health Administration. The company filed a copy of the letter with its SEC filing.

Separately, Rand said the company felt obligated to report the letter's accusations even though he called those the expressions of a disgruntled former executive.

Rand has been chairman of LEA's board since 2003. He plans to resign his state Senate seat later this month to become chairman of the state parole commission.

LEA was founded by John Carrington, a former Republican state senator from Wake County.

Feldman said he initially went to the government in December 2007 believing that LEA may have violated export laws by working with a second company in which Carrington had an ownership interest, Safe Source Inc., to develop export markets in Latin America.

Safe Source Inc. has described itself in state business records as a distributor of law enforcement equipment, mainly in Latin America.

Carrington pleaded guilty in 2005 to violating U.S. export laws when Sirchie Finger Print Laboratories, a company he once headed and that spun off LEA in 2001, illegally shipped more than $1.2 million in equipment to China through middlemen. Carrington agreed to a denial of export privileges for five years.

Feldman said he warned the LEA directors against the company doing business subsequently with Safe Source because of Carrington's export ban. Feldman said he, another LEA director, and a company attorney discussed their concerns in January 2008 with the federal commerce agent who had investigated Carrington's case.

The same month, U.S. Commerce Department export enforcement agents raided Sirchie offices, The News & Observer of Raleigh reported last year. Agents were looking for evidence that Carrington was involved in exporting after agreeing to the ban, according to a federal search warrant.

The fired CEO's letter said he also told federal prosecutors in Raleigh that Rand had engaged in insider trading and efforts to manipulate LEA's stock price, according to the filing.

Feldman was fired for insubordination, failure to properly communicate with the board, and poor performance, LEA has said.

A spokeswoman for the U.S. attorney's office in Raleigh and Carrington's attorney, Wade Smith, declined comment. Calls seeking comment were not returned by the FBI spokeswoman in Charlotte. A spokesman for Bureau of Industry and Security, a division of the Commerce Department, also did not return a call seeking comment.

SOURCE The Associated Press/The Seattle Times

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