UPDATE: WELLNESS UNIVERSE CORPORATION - THIS WAS TO THE EGRESS
April 7, 2004
Investors lost a bundle between December 1999 and February 2000, buying shares of Wellness Universe Corporation, a tiny public company whose lofty promises defied logic and common sense. At the time, Wellness Universe was characterizing itself as a "health and wellness" holding company, with a website called ThankYouGod.com, and a talent for hyperbole that would have made P.T. Barnum proud. See Wellness Universe - A Billion Questions; and Wellness Universe - For Faith, There's Thankyougod.Com. For Everything Else, The Synpan Card?
Wellness Universe displayed a talent for issuing enthusiastic press releases with eye-catching headlines. The Company declared that it was about to embark on a $1 Billion public offering - an absurd number even in the go go IPO days of the late 1990s. Then again, Wellness Universe had a penchant for tossing around nine and ten - even eleven - figure numbers. Consider a few examples:
The Company, and its affiliate Synpan Corporation, announced plans to issue a credit card that would generate $90 billion in credit card sales and return revenues of $5.4 billion a year;
Wellness said it was in negotiations to buy a website for $500 million;
Wellness declared plans to spend $120 million buying back its own shares and;
Wellness said it would spend $100 million developing a Cyberbank.
Ironically, the Company's proclamations were so transparently absurd that it almost caused us to pause and wonder whether they might be credible. Almost. After all, who would make up stuff like this. Wellness Universe would, and did.
In the end, these representations all seemed quite difficult to believe - as we pointed out in our articles on January 31 and February 2, 2000. The Securities and Exchange Commission agreed, halting trading of Wellness Universe shares on February 11, 2000. At the time, the SEC expressed concern about the accuracy and adequacy of publicly disseminated information about Wellness Universe, including its planned $1 billion IPO. See The SEC Tells Wellness Universe To Hold That Thought.
One week later, the SEC filed civil charges against Wellness Universe, Synpan and George Pappas, founder and Chief Executive Officer of both companies. Various members of Pappas's family also were named as defendants, as were several staff members at a Brooklyn, New York high school. The SEC's lawsuit charged that the defendants had defrauded the public by issuing false press releases as part of an elaborate pump and dump scheme designed to benefit Pappas and his friends and family.
According to the SEC, the Company had issued a number of misleading press releases, including those stories related to the $1 Billion IPO. As it turned out, those press releases were false and misleading. But, those blazing headlines had a decided effect on the market for Wellness Universe shares, which increased in value as a result of this "news," from approximately 10 cents a share to $1.10. Meanwhile, Pappas and his cohorts sold about 3.7 million shares of the inflated Wellness Universe stock for about $2.5 million.
The other shoe dropped on Pappas in May 2000, when he was charged with criminal fraud for his role in the Wellness Universe stock scheme.
Now the SEC has closed the case against Wellness Universe. On March 17, 2004, final judgments were entered in federal court in New York against Wellness Universe, Synpan, and Pappas. Without admitting or denying the allegations of the SEC's complaint, Wellness, Synpan, and Pappas each consented to the entry of a judgment permanently enjoining them from future securities law violations.
Pappas also agreed to disgorge $1,128,572.24 in ill-gotten gains and interest, was barred from any future penny stock offerings, and prohibited from serving as an officer or director of a public company. In addition, the final judgment prevents Pappas from ever again offering unregistered securities to investors as a broker, dealer, underwriter or issuer.
In other words, to borrow a phrase from P.T. Barnum, Pappas and his companies can just follow the signs to see the egress. And don't bother seeking readmission.
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