LITIGATION RELEASE NO. 18138 / May 14, 2003
SECURITIES AND EXCHANGE COMMISSION v. DIAGNOSTIC PROFESSIONAL IMAGING SERVICES, INC., et.al., 00 Civ. 4386 (NRB) (S.D.N.Y.)
On February 27, 2003, the United States District Court for the Southern District of New York entered Final Consent Judgments against defendants Justin Marvul ("Marvul"), Michael Danilovich ("Danilovich"), James "Gennedy" Gaberkorn ("Gaberkorn"), Vadim "Steven" Shapiro ("Shapiro") and Arthur Prakopets ("Prakopets"). The judgments permanently enjoin Marvul, Danilovich, Gaberkorn and Shapiro from future violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), and permanently enjoin Marvul, Danilovich, Gaberkorn, Shaprio and Prakopets from future violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder. As to Marvul and Danilovich, the judgments permanently enjoin them from acting as an officer or director of a public company. As to Shapiro, the judgment orders him to pay a civil penalty of $10,000 plus $2,349.47 in post-judgment interest. Prakopets was ordered to pay a civil penalty of $5,000.
The Commission's complaint, filed on June 14, 2000, alleged that between March 1998 and October 1998, Marvul, Danilovich, Gaberkorn and Shapiro conducted a fraudulent offering of securities issued by defendant Diagnostic Professional Imaging Services, Inc. ("Diagnostic"), a magnetic resonance imaging company located in Brooklyn, New York. The complaint alleges that Marvul, Danilovich, Gaberkorn and Shapiro, directly and indirectly, made material misrepresentations to investors concerning Diagnostic's business prospects, plans for an initial public offering, and anticipated use of offering proceeds. These representations were false because Diagnostic was a start up company with no prospects for a public offering and the offering proceeds were misappropriated for the defendants' benefit.
In a parallel criminal case brought by the United States Attorney's Office for the Southern District of New York, Marvul was sentenced to 46 months incarceration and ordered to pay restitution of $1,540,600, of which $560,500 is related to the Diagnostic fraud. Danilovich was sentenced to 30 months incarceration and ordered to pay restitution of $560,500, and Gaberkorn was sentenced to 18 months incarceration and ordered to pay restitution of $250,000. Shapiro was sentenced to three years probation and ordered to pay $25,000 in restitution.
The Commission's complaint also alleges that Prakopets and Direct Surgical Supplies, Ltd. ("Direct Surgical") aided and abetted a fraudulent offering of Nationwide Medical Supplies, Ltd. ("Nationwide") common stock between March 1999 and October 1999 by acting as a vehicle for them to misappropriate investor funds.
On September 21, 2001, the court entered partial final default judgments against Diagnostic, Nationwide and Direct Surgical permanently enjoining them from future violations of the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. The partial final default judgments order Diagnostic, Nationwide and Direct Surgical to disgorge ill-gotten gains they received as a result of the violations alleged in the Commission's complaint, and pay prejudgment interest in an amount to be determined by the court at a later date. The partial final default judgments also order Diagnostic, Nationwide and Direct Surgical to pay civil penalties in an amount to be determined by the court at a later date.
The Commission continues to litigate the case against the other individual defendants.