SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 18348 / September 12, 2003

SEC SUES VECTOR MEDICAL TECHNOLOGIES, INC., MICHAEL H. SALIT, JAMES P. FARNELL, MICHAEL J. FARNELL, DAVID A. ZIMMERMAN AND STANLEY B. WASSER FOR FRAUD IN CONNECTION WITH THE COMPANY'S UNREGISTERED SECURITIES OFFERING THAT RAISED APPROXIMATELY $16 MILLION PRIMARILY FROM PHYSICIAN INVESTORS

Securities and Exchange Commission v. Vector Medical Technologies, Inc., Michael H. Salit, James P. Farnell, Michael J. Farnell, David A. Zimmerman and Stanley B. Wasser, Civil Action No. 03-80858-CIV-HURLEY (SD Fla., filed September 11, 2003).

The Securities and Exchange Commission (Commission) announced that it filed an action for injunctive relief in United States District Court for the Southern District of Florida on September 11, 2003, charging Vector Medical Technologies, Inc. (Vector), Michael H. Salit (Salit), James P. Farnell (J. Farnell), Michael J. Farnell (M. Farnell), David A. Zimmerman (Zimmerman) and Stanley B. Wasser (Wasser) with securities fraud for their participation in a securities boiler room operation that raised just under $16 million from defrauded investors, mostly physicians, in an unregistered public distribution of stock. The Commission's complaint alleges that the defendants sought out physician investors to join Vector's medical advisory board as a ruse to solicit them to purchase stock in Vector, a developmental stage biomedical company purporting to have a patch capable of delivering insulin and other high-density molecular weight drugs through the skin.

Specifically, the complaint alleges, among other things, that Vector and Salit violated the anti-fraud provisions of the federal securities laws by making false and misleading statements and omissions of material fact to prospective investors concerning: (i) Vector's acquisition of revolutionary, patented, transdermal technology; (ii) Vector's impending initial public offering ("IPO"); (iii) Vector's purported success in clinical trials; and, (iv) Vector's payment of sales commissions from the offering proceeds. The Complaint also alleges that Vector and Salit aided and abetted violations of the broker-dealer registration provisions committed by J. Farnell, M. Farnell, Zimmerman and Wasser, who acted as unregistered broker-dealers by soliciting investors to purchase Vector stock.

The complaint further alleges that defendants J. Farnell, Zimmerman and Wasser had direct communications with prospective investors wherein they made numerous false and misleading statements and omissions concerning: (i) Vector's transdermal patch technology; (ii) Vector's impending IPO; (iii) Vector's current and future valuation; and, (iv) Vector's payment of sales commissions. Similarly, the complaint alleges, among other things, that M. Farnell wrote the initial sales script used to solicit prospective investors which falsely represented that Vector had a firm commitment for an IPO at $10 per share and that he knew or was reckless in not knowing that Vector was paying undisclosed sales commissions on investor funds raised.

Further, the complaint alleges that Vector did not own the rights to the transdermal technology as represented to prospective investors in Vector's offering materials and in solicitations by Vector's sales agents. The Complaint also alleges that Vector had no firm commitment for an IPO of Vector stock as represented to prospective investors by the Farnells, Zimmerman and Wasser. Finally, the complaint alleges that the business valuation report distributed to prospective investors was also materially false and misleading because it failed to include the assumptions on which the report was based.

Accordingly, the complaint alleges that Vector and Salit violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5, thereunder, and that Vector and Salit aided and abetted the sales agents violations of Section 15 (a) of the Exchange Act. Additionally, the complaint alleges that J. Farnell, M. Farnell, Zimmerman and Wasser violated Sections 5(a), 5(c) and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5, thereunder.

SEC Complaint in this matter

http://www.sec.gov/litigation/litreleases/lr18348.htm