Thursday, December 15, 2005
The SEC filed civil securities fraud charges against Jeffrey Schmidt and two other defendants alleging that they defrauded investors into providing over $11 million that was supposed to be invested in Skin Nuvo International stores even though the company was failing. Schmidt promised investors a 30-40% return on their investment in the skin care and laser hair removal firm -- once again, if it sounds to good to be true, it is. According to the SEC Litigation Release (here):
According to the complaint, Schmidt told investors their investments would finance particular new Nuvo locations, when in reality Schmidt spent the money to prop up the failing business, pay executives (including $680,000 to himself), and pay preexisting investors to maintain an illusion of profitability. Schmidt also provided investors with false income statements showing the retail locations to be substantially more profitable than they actually were.
The complaint further alleges that Nuvo’s former Chief Operating Officer Norman Valine, 39, of Las Vegas, Nevada, and a Nuvo co-owner Gary Gelnette, 51, of Concord, California, raised money from new investors even after suspecting that Schmidt may have embezzled funds and falsified financial records. Specifically, the complaint alleges that in late 2004, Gelnette, a former pastor, helped raise $1.35 million from a former parishioner, while Valine reaped $138,000 in commissions by selling Nuvo interests to four additional investors.