Countryland Wellness Resorts, Inc., Fred Cruz (a.k.a. Federico Cruz Gonzalez), Luis R. Hidalgo, Jr., and Donald E. Studer

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 16732 / September 27, 2000

Accounting and Auditing Enforcement Release No. 1327 / September 27, 2000

SEC v. Countryland Wellness Resorts, Inc., Fred Cruz (a.k.a. Federico Cruz Gonzalez), Luis R. Hidalgo, Jr., and Donald E. Studer, Civil Action No. CV-S-00-1160-PMP (RJJ)(D. Nev.).

On September 26, 2000, the Securities and Exchange Commission filed an action in federal court in Las Vegas alleging financial statement fraud against Countryland Wellness Resorts, Inc. ("Countryland"), its president and Board Chairman Fred Cruz (a.k.a. Federico Cruz Gonzalez)("Cruz"), its auditor Luis R. Hidalgo, Jr. ("Hidalgo"), and its attorney Donald E. Studer ("Studer") for the false reporting of assets in periodic filings and a registration statement made with the Commission from 1997 to the present.

The Commission's action alleges that Countryland lied to investors about the following assets reported in its financial statements and in various Commission filings:

• dirt stored in a warehouse was reported as gold with a value ranging from $19.5 million to over $27.3 million.
• mining reserves were reported to have values ranging from $1.2 billion to $2.1 billion; in fact, extensive work needed to be performed to determine the amount and value, if any, of recoverable minerals. Nonetheless, Countryland reported the mining reserves as assets from 1997 through 2000.
• Indonesian bank guarantees were reported to have values ranging from $400 million to $1.1 billion; in fact, the bank guarantees did not exist.

With respect to Hidalgo only, the Commission's complaint alleges that Hidalgo rendered false audit reports on Countryland's 1996, 1997 and 1998 financial statements. The Commission alleges that Hidalgo falsely stated that Countryland's financial statements were presented in conformity with Generally Accepted Accounting Principles and that he conducted his audit in accordance with Generally Accepted Auditing Standards. In fact, the audits were not performed in accordance with GAAS and the financial statements were not prepared in conformity with GAAP.

The complaint further alleges that Cruz, along with Countryland's counsel, Studer, knowingly included an unauthorized audit report in a June 1999 registration statement filed with the Commission.

The Commission's complaint alleges that Countryland, Cruz, Hidalgo, and Studer violated the antifraud provisions (Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder). Additionally, the complaint alleges that Countryland violated and Cruz aided and abetted Countryland's violations of the reporting (Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder), record-keeping (Section 13(b)(a)(A) of the Exchange Act) and internal control provisions (Section 13(b)(2)(B) of the Exchange Act). Cruz also falsified Countryland's books and records (Rule 13b2-1 of the Exchange Act) and violated the lying-to-an-accountant provisions (Rule 13b2-2 of the Exchange Act).

The complaint seeks a permanent injunction against each of the defendants, and civil penalties against Cruz, Hidalgo, and Studer.

Simultaneous with the filing of the Commission's complaint, Countryland, Cruz, Hidalgo, and Studer offered to settle the action by consenting to a permanent injunction, without admitting or denying the allegations in the complaint, for the violations outlined above. Cruz also agreed to pay a civil penalty in the amount of $55,000. No penalties were assessed against Studer and Hidalgo based on their demonstrated inability to pay.

The defendants are:

• Countryland Wellness Resorts, Inc., a Delaware corporation. Countryland maintains its offices in Las Vegas, Nevada. Countryland claims to be in the mining and electrical contracting business and purports to plan to operate a longevity center at a wellness resort and casino in Las Vegas. Countryland stock is not listed on any national securities exchange.
• Fred Cruz (a.k.a. Federico Cruz Gonzalez) of Las Vegas, Nevada. Since 1987, Cruz has served as Countryland's President, Board Chairman, and as a Director.
• Luis R. Hidalgo, Jr., a certified public accountant licensed in California, of Fremont, California.
• Donald E. Studer, an attorney licensed to practice law in California and Louisiana, of West Monroe, Louisiana. Studer has served as a Director and corporate counsel for Countryland since 1984.

In a separate enforcement action, on September 27, 2000, the Commission instituted an administrative proceeding against Countryland seeking to revoke the registration of Countryland's common stock. See Administrative Release No. 3-10314 (Sept. 27, 2000).