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News Release: 02-08
GRAY DAVIS, Governor
Date: 07/10/02
DEMETRIOS A. BOUTRIS, Commissioner
State Sues Perpetrators of Body Scan Scam
Southern California Center Never Opened, Leaving 76 People Out $1.3 Million
Sacramento, July 10, 2002 — The Davis Administration today announced that the Department of Corporations has filed a civil complaint in the Superior Court of Orange County against ScanTech Imaging, Inc. (ScanTech) and four other businesses for injunctive relief and full restitution to investors.
"This is a classic case of con artists taking advantage of popular trends to fleece investors," said California Corporations Commissioner Demetrios A. Boutris. "It also serves as an important reminder that California consumers should always contact the Department of Corporations before they invest."
Beginning in May 2001 and continuing through at least December 2001, ScanTech offered and sold units in an investment trust to develop and operate a medical imaging center in Southern California. The center was marketed as a "state of the art" outpatient clinic utilizing the Imatron Ultrafast Electronic Beam Tomography machine to provide coronary artery scans and full-body scans.
ScanTech contracted with unlicensed broker-dealers and sales agents who used cold calling and other boiler-room pressure tactics to solicit members of the public to invest in the unqualified, non-exempt securities.
Investors were promised annual returns ranging from 40 percent to 70 percent, with a 10-year return of 916 percent. They were told that between 30 percent and 40 percent of the money ScanTech raised would be used for marketing, commissions and other front costs, when in truth at least 70 percent of investment funds were used in this manner.
In addition, sales agents failed to disclose to investors various administrative orders and criminal convictions of some of the boiler room defendants. Investors were told that the center would be open for business sometime during the last quarter of 2001 or early in the second quarter of 2002. The Department's investigators discovered that, as of December 2001, ScanTech had not made any disbursements of the $1.3 million it received from approximately 76 investors to buy a body scan machine or secure a site for the center. To date, no center has been opened.
Last October, the Department of Corporations issued an Investor Alert urging Californians to use caution if they receive a telephone solicitation promising double-digit returns on body scan machines and centers. The Department reminds consumers to contact the Department before they make any investment by visiting www.corp.ca.gov or by calling 1-866-ASK-CORP (1-866-275-2677) to find out if a company or individual is properly licensed or has any history of violating the law.
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 or call 1-866-ASK-CORP (1-866-275-2677).
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