SECURITIES AND EXCHANGE COMMISSION
Litigation Rel. No. 16589 /June 14, 2000
SECURITIES AND EXCHANGE COMMISSION v. DIAGNOSTIC PROFESSIONAL IMAGING SERVICES, INC., NATIONWIDE MEDICAL SUPPLIES, INC., JUSTIN MARVUL, MICHAEL DANILOVICH, MARAT "MARK" ZAYATS, GREGORY LEVIN, JAMES GENNADY GABERKORN, VADIM STEVEN SHAPIRO, ARTHUR PRAKOPETS, AND DIRECT SURGICAL SUPPLIES, LTD., 00 Civ. 4386 (NRB)(S.D.N.Y.)
The Securities and Exchange Commission ("Commission") filed a complaint today in the United States District Court for the Southern District of New York against Diagnostic Professional Imaging Services, Inc. ("Diagnostic"), Nationwide Medical Supplies, Inc. ("Nationwide"), Justin Marvul ("Marvul"), Michael Danilovich ("Danilovich"), Marat "Mark" Zayats ("Zayats"), Gregory Levin ("Levin"), James Gennady Gaberkorn ("Gaberkorn"), Vadim Steven Shapiro ("Shapiro"), Arthur Prakopets ("Prakopets"), and Direct Surgical Supplies, Ltd. ("Direct Surgical"). The complaint charges the defendants with making false and misleading statements while offering and selling the common stock of Diagnostic and Nationwide, and misappropriating the proceeds of the offering. In each scheme, the defendants allegedly told investors that they had the opportunity to buy stock in the issuer prior to an upcoming initial public offering ("IPO"), and that the investors could double their money once the IPO was completed. In truth, an IPO was never on the horizon for either issuer, as both Diagnostic and Nationwide were, at best, small, thinly capitalized start-up companies. The Commission alleges that, through these schemes, the defendants raised approximately $760,000 from approximately seventy-nine investors, and misappropriated a large percentage of those funds.
The Commission's complaint names the following defendants and makes the following allegations:
1. Diagnostic is a New York corporation which claimed to have offices in Brooklyn, New York. During 1998 and 1999, Diagnostic purported to be in the business of operating a center for performing magnetic resonance imaging ("MRI") scans on patients referred by physicians. Diagnostic's stock is not registered pursuant to Sections 12 or 15 of the Exchange Act.
2. Nationwide is a Delaware corporation which purports to have its principal place of business in Brooklyn, New York. Nationwide claims to be a supplier of medical, dental and chiropractic products manufactured by others. Nationwide's stock is not registered with the Commission pursuant to Sections 12 or 15 of the Exchange Act.
3. Marvul, 26, resides in Brooklyn, New York, and, posing as "Eric Feldman," controlled Diagnostic and its bank account.
4. Danilovich, 26, resides in Brooklyn, New York and was Diagnostic's president and secretary.
5. Zayats, 29, resides in Brooklyn, New York. Zayats held himself out as someone who did "marketing" for Diagnostic. Zayats also is Nationwide's secretary, vice president and director.
6. Levin, 23, resides in Brooklyn, New York, and is Nationwide's chief executive officer, president, and chairman of the board of directors.
7. Gaberkorn, 30, resides in Brooklyn, New York. From March through June 1998, Gaberkorn was employed as a registered representative of a registered broker-dealer. Since then, he has not been associated with any broker or dealer.
8. Shapiro, 28, resides in New York, New York and Baltimore, Maryland. He has had a Series 7 license since January 26, 1995. From March through June 1998, Shapiro was employed as a registered representative of a registered broker-dealer. Shapiro is presently associated with a different registered broker-dealer, as a registered representative.
9. Direct Surgical, is a New York corporation which purports to have its principal place of business in Brooklyn, New York.
10. Prakopets, 25, resides in Brooklyn, New York. Prakopets was the president and sole employee of Direct Surgical.
Marvul, Danilovich, Gaberkorn, Shapiro, Zayats, and Levin conducted a Regulation D offering of Diagnostic common stock between March 1998 and October 1998, raising more than $580,000 from at least fifty investors. Later, Zayats and Levin, aided and abetted by Prakopets and Direct Surgical, conducted a Regulation D offering of Nationwide common stock between March 1999 and October 1999, raising another $180,000 from twenty-nine investors.
The proposed defendants involved in each offering, either directly or through others, made material misrepresentations to investors about, among other things, each issuer's plans to use the proceeds of the offering to develop its business, the likelihood that each issuer would launch an initial public offering ("IPO"), the IPO offering price, and the predicted post-IPO value of the stock. Marvul (using the false name "Eric Feldman") and Danilovich served as officers of Diagnostic and managed its stock offering. Marvul recruited others to solicit investors and encouraged them to make false representations to investors about Diagnostic's business and plans for an IPO. Danilovich and Levin solicited investors directly. Zayats recruited Gaberkorn to solicit investors and provided him with information about Diagnostic. Gaberkorn in turn involved Shapiro in the offering. Marvul and Danilovich controlled and used the proceeds of the Diagnostic offering for purposes unrelated to the corporation at a time when they knew that the funds were supposed to be used towards Diagnostic's business.
Zayats and Levin set up Nationwide, served as its officers, and conducted its stock offering. Both made material misrepresentations to investors concerning Nationwide's plans to use the proceeds of the offering to develop its business and its plans for an IPO. At least $42,000 of the Nationwide offering proceeds was diverted to Direct Surgical, a company controlled by Prakopets.
As a result of the foregoing, the Commission alleges that Diagnostic, Nationwide, Marvul, Danilovich, Gaberkorn, Shapiro, Zayats, and Levin committed securities fraud in violation of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. Prakopets and Direct Surgical are charged with aiding and abetting Nationwide's, Zayats's and Levin's fraud by assisting in the disposition of proceeds from the Nationwide offering. The Commission seeks a final judgment against the defendants, among other things: (i) enjoining them from future violations of the above-cited provisions; (ii) requiring the disgorgement of all of their ill-gotten gains, plus pre-judgment interest; (iii) assessing civil penalties against them; and (iv) barring Marvul, Danilovich, Levin and Zayats from serving as an officer or director of a publicly traded company. The Commission's suit remains pending.