Asthma Disease Management, Inc., George H. Young, Richard A. Manini, Richard B. Anderson, and Colleen Erin Kelly Bishop

Litigation Release No. 17739 /September 24, 2002

Accounting and Auditing Enforcement Release No. 1630 / September 24, 2002

SECURITIES AND EXCHANGE COMMISSION v. ASTHMA DISEASE MANAGEMENT, INC., GEORGE H. YOUNG, RICHARD A. MANINI, RICHARD B. ANDERSON, AND COLLEEN ERIN KELLY BISHOP, Civil Action No. 02-CV-7436 CW (E.D.Pa.)

SEC BRINGS FRAUD CHARGES AGAINST ASTHMA DISEASE MANAGEMENT, INC., ITS FORMER PRINCIPALS AND ITS FORMER AUDITOR

The Securities and Exchange Commission ("Commission") filed a civil fraud suit against Asthma Disease Management, Inc. ("ADMI"), George H. Young of Leesburg, New Jersey (ADMI's former President, CEO and Chairman of the Board), Richard A. Manini of Harleysville, Pennsylvania (a former director of ADMI) and Richard B. Anderson of Reno, Nevada (one of ADMI's current directors), in connection with their involvement in a fraudulent marketing scheme to inflate the price and increase the sale of ADMI securities. Also named in the complaint is ADMI's former independent auditor, Colleen Erin Kelly Bishop of Canyon Lake, California, for her role in aiding and abetting the fraud.

ADMI was headquartered in Berlin, New Jersey until February 2001, when it ceased operating its allergy testing and physician training services. The Commission previously suspended trading in ADMI securities because of concerns about the accuracy and adequacy of publicly disseminated information concerning, among other things, purported contracts between ADMI and three HMOs. The false and misleading information relating to these purported contracts is one of the subjects of the current complaint. See Exchange Act Release No. 34-42763 (May 8, 2000).

In its complaint, the Commission alleges that:

  • In February and March 2000, ADMI, Young and Anderson issued false and misleading press releases, claiming ADMI had obtained contracts with three HMOs to provide physician training for asthma treatment services when no such contracts existed.

  • Anderson personally benefited from his role in the dissemination of the false press releases by selling 93,000 shares of ADMI stock for $59,973 when the market price was artificially inflated by the false information in the press releases.

  • ADMI and Young fraudulently inflated its assets by at least 70% in Commission filings. In its Forms 10-K for the fiscal years ended May 31, 1998 and May 31,

  • 1999 and in its Forms 10-Q for the quarters ended August 31, 1998 and November 30, 1999, ADMI disseminated false and misleading information concerning the financial health of the company by including on its balance sheet a $500,000 litigation receivable in violation of Generally Accepted Accounting Principles ("GAAP"). In fact, ADMI had never filed a lawsuit seeking to recover these monies. ADMI's former independent auditor, Bishop, aided and abetted ADMI's and Young's fraudulent inflation of ADMI's assets.

  • ADMI and Young also fraudulently omitted material information from ADMI's 1998 and 1999 Forms 10-K regarding compensation paid to Young and commissions paid to Manini. ADMI issued millions of shares of SDMI stock to Young in lieu of salary and paid commissions to Manini in the form of cash and ADMI shares, for selling ADMI stock, none of which was disclosed.

  • As a result of ADMI's dissemination of false and misleading information, ADMI, Young, Manini and Anderson were able to sell millions of shares of unregistered ADMI stock to at least 100 investors in eight different states. During ADMI's fiscal year ended May 31, 2000, they raised $1.3 million from investors and used it to pay operating expenses of the company.

  • In addition, Young and Manini misappropriated and converted for the personal use at least $260,000 of investor funds from the sales of ADMI stock.

  • Manini violated the registration requirements for broker-dealers by selling ADMI stock when he was not registered with the Commission as a broker or affiliated with a registered broker-dealer.

In sum, the complaint charges that defendants ADMI, Young, Manini and Anderson violated the registration and antifraud provisions of the federal securities laws, namely, Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. Defendant Bishop is charged with aiding and abetting ADMI's and Young's primary violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. In addition, the complaint alleges that ADMI violated - and that Young and Bishop aided and abetted ADMI's violations of - the reporting provisions set forth in Section 15(d) of the Exchange Act and Rules 12b-20, 15d-1 and 15d-13. Finally, the complaint alleges that Manini also violated the broker-dealer registration provisions of Section 15(a) of the Exchange Act.

The Commission seeks permanent injunctions against all defendants, as well as disgorgement, prejudgment interest and civil penalties from Young, Manini and Anderson; and civil penalties from Bishop. The Commission also seeks to bar Young, Manini and Anderson from serving as officers or directors of any public company.

In a related matter, the Commission simultaneously instituted and settled cease-and-desist proceedings against Martin P. Jostwick of Palmetto, Florida, for touting ADMI securities on the Internet's Raging Bull Message Board. See Securities Act Release No. 33-8133.