Nasdaq takes Novatek off its market Another pact's terms are disputed, this time by Argentine officials

Company executives silent

Claims of contracts worth millions lifted Columbia firm's stock

November 06, 1996|By Mark Guidera | Mark Guidera,SUN STAFF

Novatek International Inc., the Columbia-based medical supplies company under federal investigation for fraud, was delisted yesterday from the Nasdaq stock market.

Meanwhile, a continuing review by The Sun into Novatek's contract claims has found another agreement which Novatek appears to have misrepresented in a news release as having been signed in Argentina.

Nasdaq's action makes it impossible for the company's 13 million outstanding shares to be traded through its system.

Officials said the move was intended to "protect and strengthen the quality of and public confidence in the Nasdaq stock market" and to "protect prospective investors and the public interest."

However, ostensibly at least, shares could be traded in what's called the "pink sheet" market, where brokers trade on low-priced, infrequently traded stocks. This over-the-counter market is unregulated.

Reid Walker, a Nasdaq spokeswoman, said a hearing panel recommended to Nasdaq's board of directors that Novatek be delisted after a meeting with company representatives Thursday.

Novatek executives could not be reached for comment yesterday. The company's phone line had a busy signal throughout the day. David R. Kuney, a Washington lawyer representing the company in its bankruptcy case, also could not be reached for comment.

Trading in the company, which planned to change its name to Medical Products Inc., was halted by Nasdaq Oct. 11, and the Securities and Exchange Commission followed that announcement by saying it had launched an investigation into the company's claims about multimillion-dollar contracts Novatek said it had landed in Latin America. The SEC suspended trading in Novatek stock Oct. 15. Since then, the company has filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.

An investigation of Novatek's contract announcements by The Sun has raised serious questions about the validity of a series of contracts the company announced it had signed. At least one -- a 10-year contract the company said a Brazilian medical institution had signed -- doesn't exist, according to officials connected to the institution, the Oswaldo Cruz Foundation.

Since The Sun published its findings Sunday, government officials in Argentina have said they signed no contract that guarantees payment of millions of dollars as Novatek claimed in public statements.

No contract signed

Novatek's chairman, Jamie Puccio, announced Sept. 3 that the health ministry for Mendosa province in Argentina had signed a five-year contract with Novatek worth an estimated $3 million annually.

Puccio said the agreement called for Novatek to provide a prescreening program for diseases at blood banks, hospitals, emergency centers and other medical institutions in Mendosa.

But no such agreement -- or any contract for that matter -- was ever signed, according to Nila Cerezo, secretary to the minister of health in Mendosa, Pedro Pablo Marquez.

The Mendosa contract was one of two Argentine agreements the company said it signed. The other was with Corrientes province for Novatek's diagnostic test kits. The company said the deal with the Corrientes health ministry was also five-year contract worth $3 million annually.

While the company does have an agreement with the Corrientes dTC agency to participate in a prescreening program at blood banks, the agreement does not spell out any specific purchases from Novatek, nor any firm dollar amount for Corrientes to pay Novatek, according a copy of the agreement obtained by The Sun through the U.S. Embassy in Buenos Aires.

Officials at the health ministry in Corrientes said last week that they were still testing Novatek's disease detection kits to see if they wanted to buy any.

At the time Puccio announced the Mendosa contract, he also said the company was projecting a $4 million "gross profit" for the last six months of the year.

The company has not yet filed a third-quarter report.

The multimillion-dollar contracts and other upbeat announcements by the company have helped propel its stock price to a record high of more than $13 a share during the past six months.

The SEC is investigating the contracts and how the company valued its assets in public documents filed with the SEC and distributed to investors.

Pub Date: 11/06/96

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