U.S. sues Wellness Universe, says investors defrauded
Wed Feb 16 21:02:00 EST 2000
NEW YORK, Feb 16 (Reuters) - The Securities and Exchange
Commission sued the Wellness Universe Co. and its
chief executive officer on Wednesday for allegedly defrauding
investors by selling them shares after issuing false press
releases to boost the share price.
The suit, filed in Manhattan federal court, also names
Synpan Corp, a related business entity. Other defendants
include George Pappas, the CEO of both Wellness and Synpan,
various Pappas family members, and staff at a Brooklyn high
school including the vice-principal, a teacher and a teacher's
assistant.
Representatives of the companies or other plaintiffs were
not immediately available for comment on Wednesday.
Wellness is a Minnesota company with offices in Bloomington
and Minneapolis. The suit said it "purports to be an umbrella
organization of health and wellness services." The suit alleges
the company's securities are not registered with the SEC and it
has not filed any periodic reports to the commission.
Synpan is a Delaware corporation owned by Pappas. Its
securities also are not registered with the SEC.
On Friday, the SEC suspended trading in Wellness Universe
through Feb. 25, citing concerns about the accuracy of news
about the company.
The suit alleges the scheme was largely conducted over the
Internet since December. It alleges that Synpan claimed in
press releases posted on its own and other Web sites that it
planned to buy an Internet business for $500 million, that it
would conduct an initial public offering of its stock for $1
billion and that it had hired an experienced executive to
operate its Internet business.
Synpan said that Wellness shareholders would benefit from
these plans because Synpan planned to buy Wellness stock and
merge the businesses.
The claims, posted on the Internet, caused Wellness stock
to rise from about 10 cents per share in December to over $1
earlier this month, the suit said.
The suit alleges that the press releases were false
because, among other things, Synpan did not have the resources
to make a $500 million acquisition and there was no basis for
the assertion that Synpan could raise $1 billion through an IPO
of its stock.
The suit alleges that Pappas and other defendants were able
to sell about 3.7 million shares of Wellness stock to the
public for about $2.5 million until last's week's order
stopping trading, the suit said.
REUTERS
Rtr 21:02 02-16-00
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