NEW YORK -(Dow Jones)- A group of offshore investors filed suit
Friday against Medical Industries of America Inc., alleging the medical services provider misappropriated the investors' money and failed to issue the common stock to which the investors were entitled.
The suit, filed in federal court in New York, alleges the investors were fraudulently induced into investing almost $2.7 million in two Regulation S offerings of Medical Industries convertible preferred stock. The company then failed to issue the common stock to which the investors' preferred stock was to be converted, and engaged in manipulation of the company's stock price, the suit alleges.
As reported in December, a number of similar disputes have arisen between small companies and offshore investors, in which the companies have stopped allowing investors the right to convert their convertible securities into common stock.
Medical Industries, which halted conversion because it ran out of authorized common shares to issue to preferred stock holders who were converting their securities, knew it did not have enough authorized common shares and never intended to honor conversion requests, the suit alleges.
Also named as a defendant in the suit is Westmark Group Holdings Inc., a company with close ties to Medical Industries. Medical
Industries allegedly "funnelled" some of the investors' funds to
Westmark, according to the suit. The money was purportedly a loan to
Westmark, but it was never repaid, according to the suit.
Linda Moore, Medical Industries' senior vice president and a
defendant in the suit, denied the suit's allegations. "The company has
done everything by the book," she said.
A Westmark spokesman could not immediately be reached for comment.
Copyright (c) 1997 Dow Jones & Company, Inc.
All Rights Reserved. |
