SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17104 / August 16, 2001
SECURITIES AND EXCHANGE COMMISSION v. AMERICAN HEALTHCARE PROVIDERS, INC., ARTHUR W. WHEELER, LARS M. KRAM, ANGEL L. LORIE JR., LUIS F. LORIE, AND MICHAEL ANTHONY LESTER 01 CV 7649 (BSJ) (S.D.N.Y) (August 16, 2001)
SEC Charges American Healthcare Providers, Inc. and Five Individuals for Roles in Internet Pump-and-Dump Scheme
The Securities and Exchange Commission announced that it filed a civil injunctive action charging American Healthcare Providers, Inc. and five individuals for their roles in an Internet market manipulation scheme. The Commission's complaint alleges that American Healthcare was a start-up company with "headquarters" in the New York City apartment of one of the defendants, and had virtually no business operations. The Commission charges that after pumping up the price of American Healthcare stock through an extensive campaign of false press releases and Internet message board postings, certain of the defendants sold their American Healthcare stock to the public, reaping at least $1.47 million in illicit gains.
Charged in the Commission's complaint filed in the U.S. District Court for the Southern District of New York, were the following:
The Commission's complaint alleges as follows:
Angel Lorie and Luis Lorie controlled American Healthcare and orchestrated the fraudulent scheme. The defendants made the following false and misleading statements in the course of the scheme:
Press Releases Between August 27, 1999 and May 25, 2000, American Healthcare issued a series of press releases that falsely stated that American Healthcare had acquired businesses which would add millions of dollars in income, entered into an $8 million contract to service thousands of patients in a New York medical group, obtained the right to purchase a pharmacy, issued 1998 "audited" financial statements, and entered into a signed contract worth over $90 million with New York City.
Internet Message Board Contemporaneous with the publication of the false press releases, Luis Lorie and Lester conducted a campaign of making false statements about American Healthcare by posting messages using various aliases on an Internet website with message boards devoted to the discussion of different securities. In those messages, Lester and Luis Lorie repeated the false statements that were in the press releases, touted American Healthcare stock, misrepresented their identities and misrepresented their trading activity. In one instance, using a pseudonym, Luis Lorie posted a series of messages on the Raging Bull Internet message board describing a fictional "due diligence" visit to American Healthcare's New York City "office." After setting forth extensive fabricated details concerning his visit, Luis Lorie concluded the posting by thanking various American Healthcare personnel for assisting him, including "Charles" and "Trudy", whom he thanked for their "TIME and EFFORT in spending time with me and giving me the understanding I thought I had in AHEA." In truth, Charles and Trudy were Wheeler's pet dogs.
Websites Lester also maintained two corporate websites for American Healthcare that contained, among other misrepresentations, false financial statements representing that American Healthcare had over $4 million in assets but omitted to disclose that American Healthcare's auditors had refused to render an opinion on the company's financial statements because the $4 million asset figure could not be verified.
As the defendants disseminated false information to investors, American Healthcare issued more than 5.8 million shares of unrestricted stock in unregistered transactions, approximately 3.4 million of which was directly issued to nominee companies of the Lories. The Lories, through their nominee companies and relatives, sold at least 3.26 million of these shares to the public for at least $1.47 million.
The Commission seeks the following relief: (i) permanent injunctions from further violations of the antifraud, registration, and antitouting provisions of the federal securities laws (Sections 5 (a) and (c), and 17(a)and (b) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10(b)(5) thereunder); (ii) a permanent injunction against Angel Lorie from further violations of a Commission Order prohibiting Angel Lorie from participation in a penny stock offering and from Section 15(b) of the Securities Exchange Act of 1934; (iii) disgorgement from Wheeler, Kram, Angel Lorie, and Luis Lorie; (iv) civil monetary penalties against Wheeler, Kram, Angel Lorie, Luis Lorie, and Lester; and (v) an order barring Wheeler, Kram, Angel Lorie, Luis Lorie, and Lester from serving as officers or directors of a public company.
On June 15, 2000, the SEC issued a ten-day suspension of trading in the securities of American Healthcare because of questions raised about the accuracy of publicly disseminated information concerning American Healthcare. The trading suspension followed a press release by American Healthcare in May 2000 in which American Healthcare announced an exclusive multi-million dollar contract with the New York City Link program, a service that seeks to ensure that mentally ill patients from New York City prisons receive necessary treatment and medication. The Commission's complaint alleges that the press release was false and that no such contract ever existed.
The Commission thanks the New York City Health and Hospitals Corporation for their cooperation in this matter.
For tips on how to avoid Internet "pump-and-dump" stock manipulation schemes, visit http://www.sec.gov/investor/online/pump.htm. For more information about Internet fraud, visit http://www.sec.gov/divisions/enforce/internetenforce.htm. To report suspicious activity involving possible Internet fraud, visit http://www.sec.gov/complaint.shtml.