SEC charges company with fraud in stock sales
Colonie -- Medical products firm, accused of running a "boiler room," OKs settlement
By JEREMY BOYER, Business writer
First published: Wednesday, March 12, 2003
A small company that makes safety products for medical needles at a plant off Central Avenue has settled federal charges that it fraudulently sold $3.75 million in unregistered private stock between 1997 and 2001.
The U.S. Securities and Exchange Commission filed a complaint Tuesday against North American Medical Products Inc., which operates at 3 Walker Way in the village of Colonie, as well as its president. Also named in the complaint were a former director who lives in California and three unregistered brokers in California who sold the company's stock.
SEC investigators allege North American Medical Products significantly overstated its growth prospects to potential investors in sales materials and by telephone.
Investigators claim one broker falsely told potential investors that the company received a $1 million order from New York City officials the day after Sept. 11, 2001, for products to use in treating injured people at the World Trade Center site. "That was a complete fabrication," said Richard Sauer, assistant director of enforcement at the SEC. "It was whatever would sell the stock."
According to the claim, brokers also told potential investors that the company would generate $540 million in sales over the next five years, including $50 million to $100 million in sales in 2001. In reality, the company's highest annual revenue has been about $200,000.
Individuals named in the SEC complaint include company president Arthur Gianakos, 54, of Albany. On Tuesday, he referred questions on the case to his attorney, Leslie Apple of the Albany law firm Whiteman Osterman & Hanna, who was unavailable for comment.
SEC officials said North American Medical Products continues to operate and Gianakos remains with the company. "We take no position as to what its future is," Sauer said.
The stock-selling operation was conducted in Orange County, Calif., using "boiler rooms," a term that describes a small group of high-pressure sales professionals who make cold calls to potential investors.
As part of a deal to settle the charges against them, North American Medical Products and Gianakos admitted no guilt but agreed to cooperate with SEC investigators. Gianakos also agreed to forgive a $355,000 loan he made to the company as an attempt to boost its financial health and improve the value of the stock held by investors.
The other defendants in the case all reside in California, which is where the SEC complaint was filed in U.S. District Court. Those charged were Niko G. Efstathiou; Paul Mason, who also uses the name Louis Ronnie Sarpy; Laurence Mark Anderson, also known as Ron Laurence; and Kristin Luck Emery.
Efstathiou, a former director at North American Medical Products, also settled the SEC charges and agreed to give back the 1.05 million shares he received in connection with the stock sales.
The company agreed to surrender the remaining $120,000 in proceeds from the stock sales and to cancel the shares returned by Efstathiou. The SEC identified Mason, Anderson and Emery as boiler room operators. |
