Vital Living Says It May Face Fraud Charges Over Anthrax Tests
By David Evans
Matthews, North Carolina, Dec. 14 (Bloomberg) -- Vital Living Products Inc. said the company and its chief executive officer may face federal fraud indictments in connection with their effort to sell kits to test for anthrax.
Vital Living also said the Securities and Exchange Commission's staff recommended that the agency file civil securities fraud charges against the company and Chief Executive Donald Podrebarac and Vital Living may not have the money to defend the suits.
``These investigations and related litigation will be very costly to defend and we might not have sufficient resources to mount successful defenses,'' the Matthews, North Carolina, company said in the filing.
On Nov. 28, Bloomberg News reported Vital Living was the subject of an SEC investigation. A day later, its headquarters was raided by a team of agents from the Federal Bureau of Investigation, armed with a search warrant.
The company said federal prosecutors in New York are investigating whether its marketing of the anthrax test kit was ``part of a fraudulent criminal scheme, as well as whether we may have violated various federal securities laws.''
Vital Living shares soared 40-fold in October, before Bloomberg reported that two retail chains denied Vital Living's claims that retailers had agreed to sell the anthrax kits.
Last month, Bloomberg reported that Sani-Pure Food Laboratories denied both Vital Living's claims that it ``certified'' the kits, and that the lab tested them with anthrax.
Vital Living revealed in yesterday's SEC filing that its decision to stop marketing the kits on Nov. 30 came after learning the Federal Trade Commission would seek a court order to halt its sales of the product.
The company also disclosed investigations of its anthrax test kit announcements by the National Association of Securities Dealers and the North Carolina Department of Justice. The NASD and the SEC are also investigating ``potential unlawful insider trading,'' said Vital Living.
The SEC staff may recommend that the agency seek remedies including fines, an injunction preventing future securities law violations, and an order banning Podrebarac from working for any publicly traded company, including Vital Living, the company said.
Vital Living, which has lost money every year since it was founded in 1990, said its net worth was negative $2.4 million on Sept. 30. It repeated a statement saying it had ``substantial doubt about the company's ability to continue as a going concern.''
The shares, which traded as high as $2.08 on Oct. 18, fell 1 cent to 16 cents yesterday. |
