SECURITIES AND EXCHANGE COMMISSION Washington, D.C. Litigation Release No. 15786 / June 18, 1998 Accounting and Auditing Enforcement Release No. 1046 / June 18, 1998 SEC v. William P. Trainor, Vincent D. Celentano, Medical Diagnostic Products, Inc. (f/k/a Novatek International, Inc.), Karen Losordo, Diane M. Trainor, Daniel J. Trainor, Geraldine Trainor and Mary N. Celentano (Civil Action No. 98-CV01533) (EGS) (USDC/DC) The Commission today filed a Complaint in the United States District Court for the District of Columbia against Medical Diagnostic Products, Inc. (f/k/a Novatek International, Inc. Novatek ), a Columbia Maryland-based company that purports to distribute medical diagnostic test kits, William P. Trainor and Vincent D. Celentano. The Commission s Complaint alleges that Trainor and Celentano committed a massive fraud on investors by, among other things, orchestrating a series of sham transactions among Novatek and other companies that they controlled, followed by their issuing a series of press releases which announced that Novatek had entered into highly profitable contracts with a variety of other entities. No such contracts existed. The Complaint also names Karen Losordo, Diane M. Trainor, Daniel J. Trainor, Geraldine Trainor and Mary N. Celentano as relief defendants. The Complaint alleges that the defendants violated the antifraud and reporting provisions of the Securities Exchange Act of 1934, specifically Sections 10(b), 13(a), 13(b)(2)(A) and (B), 13(b)(5), 13(d) and 16(a) and Rules 10b-5, 12b-20, 13a-13, 13b2-1, 13d-1 and 16a-3 thereunder, and seeks to enjoin them from future violations of the federal securities laws. The Complaint also seeks to obtain civil penalties from the individual defendants and to bar them from serving as officers or directors of public companies. The Complaint further alleges that Trainor and Celentano controlled Novatek, although neither they nor the company disclosed this fact to investors. Through the sham transactions, the last of which occurred in April 1996 and involved a merger between Novatek and Medical Products, Inc. ( MPI ), a private company owned by Trainor and Celentano, Novatek acquired a license to distribute medical diagnostic test kits in South America and Latin America. Novatek accounted for the combination on its financial statements as an acquisition of MPI by Novatek and falsely claimed that the distribution license had a value in excess of $50 million. From that point until October 1996, Trainor and Celentano caused the price of Novatek common stock to increase by knowingly or recklessly causing Novatek to issue materially false and misleading press releases which falsely stated, among other things, that Novatek had entered into agreements worth a total of $400 million with various South American and Latin American entities. The Complaint also alleges that Trainor and Celentano fraudulently disbursed more than $4.5 million of Novatek investor funds to family ======END OF PAGE 1====== members and entities associated with them without any legitimate business reason. The Complaint further alleges that Trainor and Celentano caused Novatek to file periodic reports with the Commission on Forms 8-K/A and 10-QSB that contained materially false and misleading financial statements. Novatek grossly overstated the value of its assets at more than $57 million when, in reality, Novatek s assets were approximately $2 million. The Commission acknowledges the assistance of the National Association of Securities Dealers, the Comissƒo De Valores Mobiliarios of Brazil, the Comision Nacional De Valores de Argentina, and the Superintendencia De Valores y Seguros of Chile in this matter. ======END OF PAGE 2======