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Monday, December 28, 2009

Former CEO and Securities Counsel Settle Financial Fraud Charges

The SEC settled financial fraud charges against Richard E. McDonald, former President, CEO and Chairman of World Health Alternatives, Inc. ("World Health"), a now defunct medical staffing company previously located in Pittsburgh, Pennsylvania. The Commission's complaint alleges that McDonald was the principal architect of a wide-ranging financial fraud at World Health by which McDonald misappropriated approximately $6.4 million for his personal benefit. Other defendants, who also settled charges, are Deanna Seruga, the company's former controller and a CPA, Marc D. Roup, a former CEO of World Health, and Joseph I. Emas, World Health's former outside securities counsel. The settlements are pending final approval by the court.

The complaint alleges that, from at least May 2003 through August 2005, McDonald, along with Seruga and Roup, engaged in a wide array of fraudulent and improper conduct. A key aspect of the fraud involved the manipulation of World Health's accounting entries. McDonald and Seruga repeatedly falsified accounting entries in World Health's financial books and records, understating expenses and liabilities. This made the Company appear more financially sound, and masked McDonald's misappropriation of funds. During the relevant period, every annual and quarterly report that World Health filed with the Commission contained false financial statements.

As alleged in the complaint, McDonald also improperly attempted to issue and register for immediate sale millions of shares of World Health stock by misusing a Form S-8 registration statement. In addition, McDonald also caused World Health to file with the Commission two false post-effective amendments drafted by Emas, World Health's outside securities counsel.

McDonald has consented to the entry of an order permanently enjoining him from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b), 13(b)(5) and 16(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1, 13b2-2 and 13a-14 thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. The order will also bar McDonald from serving as an officer or director of a public reporting company. The order finds McDonald liable for disgorgement of approximately $6.4 million plus prejudgment interest. Based on sworn financial statements and other documents and information submitted to the Commission, payment of disgorgement and prejudgment interest will be waived and civil penalties not imposed.

Roup has consented to the entry of an order permanently enjoining him from violating Sections 5(a), 5(c) and 17(a) of the Securities Act, Sections 10(b) and 16(a) of the Exchange Act, and Rules 10b-5 and 13a-14 thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. The order will also bar Roup from serving as an officer or director of a public reporting company. Roup will also be ordered to pay disgorgement and prejudgment interest of $5,324,187, and a $120,000 civil penalty. Roup consented to transfer his assets to a court-appointed receiver to satisfy payment of these amounts.

Seruga has consented to the entry of an order permanently enjoining her from violating Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5, 13b2-1 and13b2-2 thereunder, and aiding and abetting violations of Section 13(a) of the Exchange Act, and Rules 12b-20, 13a-1 and 13a-13 thereunder. The order finds Seruga liable for disgorgement of $383,662 plus prejudgment interest. Based on sworn financial statements and other documents and information submitted to the Commission, payment of disgorgement and prejudgment interest will be waived and civil penalties not imposed. In addition, Seruga agreed to settle a related administrative proceeding by consenting to the entry of an order suspending her from appearing or practicing before the Commission as an accountant.

Emas has consented to the entry of an order permanently enjoining him from violating Sections 5(a), 5(c), 17(a)(2) and 17(a)(3) of the Securities Act. Emas will also be ordered to pay disgorgement and prejudgment interest of $163,083, and a $15,000 civil penalty. In addition, Emas agreed to settle a related administrative proceeding by consenting to the entry of an order suspending him from appearing or practicing before the Commission as an attorney for two years.

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