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News Release: 01-17
GRAY DAVIS, Governor
Date: 10/18/01
DEMETRIOS A. BOUTRIS, Commissioner
Californians Encouraged to Give Organ Scan Investments a Thorough Checkup
**I NVESTOR ALERT **
Sacramento, October 18, 2001 — The Davis Administration today urged Californians to use caution when offered investments in medical imaging centers utilizing heart and body scanning machines.
"Beware of boiler room operations cold-calling you with unrealistic promises of double-digit returns on heart scan technology," said California Corporations Commissioner Demetrios A. Boutris. "Some of these predatory investment practitioners promise returns of more than 45 percent, but then skim off that amount and more in sales commissions. Simple arithmetic tells you that doesn't leave much for developing and advertising a business, let alone making a profit to pay back investors."
Medical imaging centers use Electron Beam Tomography (EBT) scanners that create 3-D images of organs to screen for things like calcification in the arteries of the heart. EBT technology has generated considerable media attention, including articles in The Wall Street Journal and USA Today and a segment on "The Oprah Winfrey Show."
The California Department of Corporations recently intervened in a civil action against the fundraisers behind proposed EBT centers in Beverly Hills and Palm Springs. In papers filed in the Orange County Superior Court, the Department alleges that although investors were assured that no more than 7 percent of their money would be used for sales commissions, telemarketers were paid commissions equaling as much as 47 percent of investors' funds.
The Department's enforcement division is currently investigating several more private placement offerings, each of which involves a $3 million to $5 million venture.
Governor Davis has signed legislation that will go a long way towards protecting consumers from unscrupulous boiler room operators. By paying a $1 fee to place their names on a statewide "do-not-call" list, Californians may opt to block telephone sales calls, including those which "sell or promote any investment, insurance or financial services." Businesses will face fines if they fail to comply with the new law, which takes effect January 1, 2003.
Prospective investors are advised to visit the Department of Corporations' Web site at www.corp.ca.gov to find out if the company offering the investment is licensed. Also, ask about the background and track record of the company handling the investment funds - representatives from legitimate enterprises are generally willing to answer questions and accommodate a request for an appointment to meet with the company's officers. Boiler room solicitors marketing bad investment deals are more likely to hang up than respond to serious, pointed questions.
The Department of Corporations is California's Investment and Financing Authority, reporting to the Business, Transportation and Housing Agency and the Governor. The Department is responsible for the regulation, enforcement and licensing of securities, franchises, off-exchange commodities, investment and financial services, independent escrows, consumer and commercial finance lending and residential mortgage lending. For further information or to obtain a complaint form, see the Department's Web site at www.corp.ca.gov.
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