Novatek figures respond to case Celentano pleads Fifth, Trainor says charges should be dismissed

Securities

September 23, 1998|By Mark Guidera | Mark Guidera,SUN STAFF

A central figure in an alleged stock-rigging scheme involving Columbia-based Novatek International Inc. has invoked his Fifth Amendment rights against self-incrimination in answering a Securities and Exchange Commission complaint.

A second key defendant argues that all the charges the SEC made against him should be dismissed for lack of evidence.

In papers filed in U.S. District Court in Washington, Vincent D. Celentano, a wealthy Hillsboro Beach, Fla., real estate developer and businessman, argues that his Fifth Amendment refusal to respond to the allegations should be viewed by the court as a denial of all charges, not an admission of any wrongdoing.

Celentano's lawyer, Joseph I. Goldstein of the Washington firm Crowell & Moring, was not available for comment yesterday.

Celentano's business partner and Hillsboro Beach neighbor, William P. Trainor, argues in his response to the SEC allegations that the court should dismiss all charges against him.

The SEC, Trainor argues in his response, supports its claims "with nothing more than conclusory allegations and scandalous surplusage."

In its initial complaint, filed in June, the SEC alleged that Trainor and Celentano masterminded a scheme to take over Novatek International Inc., at the time a failing manufacturer of steel house framing, and use it as a front to create millions of shares of stock. They moved the company to Columbia from Boynton Beach, Fla.

The SEC charged that the two then inflated the stock price by issuing false news releases in 1996, claiming that the company had been awarded multimillion-dollar contracts for medical diagnostic test kits in Latin America. The company was delisted from the Nasdaq small-cap market in October 1996.

Novatek, now Medical Diagnostics Products Inc., subsequently filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Baltimore. It is defunct and appears to be headed for liquidation.

The SEC revised its complaint in August with allegations that the two also illegally sold stock in a fake Russian health care company, Health Care Ltd., to U.S. investors.

The SEC said the company did not have any contracts or products and that the company was not publicly listed on any Russian stock exchange as claimed.

Trainor argues in his response to the allegations that the SEC fails to link him to any key position with either company or to offer specifics of how he was involved in any violations of SEC law.

"Indeed, despite naming Mr. Trainor in seven claims based on alleged violations of more than a dozen provisions of the Securities Act it never alleges that he was an officer, director or employee" of either Novatek or Health Care Ltd., Trainor argues.

"Furthermore, the complaint fails to specify any conduct by Mr. Trainor that he caused the alleged allegations" Trainor's response states.

He further argues that the SEC allegations fail to distinguish which alleged violations he was involved in from those of Celentano.

The complaint "fails to allege its fraud claims with the particularity required and fails to set forth sufficient facts to enable Mr. Trainor to defend," against the claims, Trainor states in his court filing.

bTC Trainor's lawyer, Howard Shiffman of Dickstein Shapiro Morin & Olensky in Washington, could not be reached for comment yesterday. James Kidney, an SEC lawyer working on the case, said yesterday that the SEC has filed a solid case against Trainor, Celentano and others named in the complaint and fully expects a federal judge to allow the case to move forward.

Trainor's wife, Geraldine Trainor, his daughter, Diane M. Trainor, a Hillsboro Beach, Fla., attorney, and his son, Daniel J. Trainor, also filed requests Friday that the court dismiss charges against them.

They were also named in the SEC complaint.

The SEC alleged that "fraudulently obtained funds" amounting to about $4.5 million tied to the sale of Health Care Ltd. shares and Novatek, were distributed to the three, some of it from a bank account held in the name of New England Diagnostics Inc.

That company, which claimed it had a licensing deal with Novatek for diagnostic kit distributions, is at least partially owned by Trainor, according to SEC investigators and Novatek's bankruptcy lawyer.

The SEC is seeking the return of that money.

Pub Date: 9/23/98

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