Creditors move to seize Novatek figure's assets Trainor fails to make fraud case payment

suit is being revived

Securities fraud

October 08, 1998|By Mark Guidera | Mark Guidera,SUN STAFF

British investment house Wood Gundy London Ltd. and other creditors are moving to seize assets of William P. Trainor and one of his companies after he failed to pay more than $2 million of a settlement reached in a fraud suit in connection with Novatek International Inc. of Columbia.

Wood Gundy and the creditors filed notice Sept. 30 in U.S. District Court in Baltimore that they are rekindling their $8 million lawsuit against Trainor and his business partner Vincent D. Celentano.

"We gave Trainor a chance to put all this behind him, but he missed that opportunity," said Edward Meehan, an attorney with Skadden, Arps, Slate, Meagher & Flom LLP in Washington, which is representing Wood Gundy and an unsecured creditors group.

In addition, Wood Gundy and the creditors have amended the suit to add others they allege are tied to the fraud, including Trainor's wife and children, and Celentano's wife, Mary N. Celentano.

Wood Gundy and the creditors filed the initial suit last October, a year after trading in Novatek was halted and the company filed for bankruptcy protection.

In the suit, Wood Gundy, a unit of the Canadian Imperial Bank of Commerce in Toronto, claimed that it had lent Novatek $4 million in 1996 based on its claims about licensing deals and contracts to sell medical diagnostic test kits manufactured by Universal HealthWatch Inc. of Columbia.

Under a settlement reached in May, Celentano and his wife signed over rights to $280,000 they were due from the sale of a Novatek property in Florida and $100,000 due from a business loan.

Trainor agreed to pay $2.8 million and signed a "confessed judgment," under which his assets and those of his company, New England Diagnostics Ltd. of Hingham, Mass., could be seized in the event of default.

According to federal court records, Trainor paid $700,000 of the settlement but failed to meet an Aug. 1 deadline for paying the $2.1 million balance.

"The settlement agreement gave us the right to immediately seize [Trainor's] assets. We will go after these things aggressively now," said Meehan.

Paul M. Vettori, a lawyer with White, Miller, Kenny and Vettori in Towson who is representing Trainor in the lawsuit, said he had not yet reviewed Wood Gundy's amended suit and declined to comment on it. He also said he could not comment on Wood Gundy's allegation that Trainor defaulted on the $2.8 million settlement.

The amended suit names Trainor and Vincent Celentano; Trainor's company New England Diagnostics; Universal HealthWatch; Trainor's wife, Geraldine Trainor; and six of Trainor's children, including his daughters, Karen Losordo, president of New England Diagnostics, and Diane M. Trainor, a Florida lawyer.

"Defendants knowingly conspired with themselves and others to effect shell transactions and fraudulent conveyances for the purpose of siphoning Novatek's corporate assets and converting the same for their personal use," the suit states.

It seeks the return of $8 million that the creditors allege Novatek paid New England Diagnostics for licenses to the kits, as well as other compensatory damages.

Wood Gundy says in the suit that it expanded the action because banking records show that more than $6 million of Novatek funds was transferred through New England Diagnostics between March 1, 1996, and Oct. 30, 1996, to members of the Trainor and Celentano families.

According to court records, the transfers included:

* $1 million to Trainor's daughter Diane M. Trainor.

* $2.5 million to Daniel J. Trainor & Co., a company operated by Trainor's son, Daniel J. Trainor.

* $624,000 to Trainor's daughter Karen Losordo.

* $250,000 to Mary N. Celentano.

* $477,000 to Vincent D. and Mary N. Celentano.

* $500,000 to Hillsboro International Inc., whose mailing address is the Celentano home. Its director is Celentano's son, Vincent L. Celentano.

The suit also alleges that $415,000 in Novatek funds were transferred to Universal HealthWatch, "purportedly for deposits XTC on medical test kits." The suit claims that Universal had no manufacturing capacity or product registrations in countries in which Novatek claimed it had sales contracts.

Andrew D. Levy, a Baltimore lawyer who has represented Universal in the past, said Universal should be dismissed from the suit.

"The claim didn't have any merit the first time around and doesn't now," he said. "The thing that has always distinguished Universal is that it's for real and it's technology is for real."

In February, U.S. Bankruptcy Judge James T. Schneider dismissed Universal HealthWatch from the original lawsuit.

Levy said Universal never planned on manufacturing its kits at its Columbia headquarters. "They always intended to subcontract out the manufacturing of the tests. This suit is a case of guilt by association," he said.

Meehan, the creditors' lawyer, declined to disclose which assets of Trainor and New England Diagnostics the creditors would seek to seize.

In June, the Securities and Exchange Commission filed a complaint against Trainor and Celentano, charging the two Hillsboro, Fla., residents with committing "massive fraud against investors" by orchestrating sham transactions to inflate Novatek's stock price. Celentano and Trainor are fighting the charges.

Pub Date: 10/08/98

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.