Judge Freezes Accounts of Company Touting AIDS Treatment
Apr. 26, 1996
WASHINGTON (AP) _ A federal judge froze the assets of a Pennsylvania company offering a controversial treatment for AIDS and ordered a full financial accounting amid charges that it misled patients, some desperate for a cure, into buying the company's stock.
The Securities and Exchange Commission said Friday it charged Lazare Industries Inc. of Marshalls Creek, Pa., and the company's chief executive, Richard J. Harley, 52, with engaging in a scheme to defraud at least 72 investors in the sale of $1.4 million of Lazare stock.
Harley was accused of using some of the funds for personal expenses, such as college tuition for his children. His wife, Jacqueline M. Kube, was named in the complaint as benefiting from misused investor funds.
U.S. District Judge Thomas Vanaskie in Scranton, Pa., issued the temporary restraining order against Lazare and Harley that froze their accounts, ordered them to provide a full accounting and not to violate securities laws. A court hearing was scheduled for next Friday.
In a lawsuit, the SEC alleged that Lazare and Harley made misleading statements to investors or omitted important facts about the company's ozone-oxygen therapy. They claimed the therapy was patented and underwent extensive testing that showed it was an effective treatment for AIDS and other diseases.
The therapy wasn't patented, the SEC said, and a single clinical test was halted in 1989 by the Food and Drug Administration after two months. Armed with a search warrant, FDA officials seized records and equipment in January that Harley used for the treatments, the SEC said.
The FDA said it was ``unaware of any evidence that ozone is generally recognized as safe and effective in the diagnosis, cure, mitigation, treatment or prevention of AIDS,'' according to the SEC lawsuit.
``The treatment consists of a series of `ozone-oxygen enemas,' which are administered by Harley and his staff,'' the SEC said.
The treatment was advertised on the Internet, radio and in direct mailings, with patients encouraged to visit the Lazare clinic.
``Upon entering the clinic, Harley solicits visitors, some of whom are desperately in search of a cure for AIDS, to invest in his ozone-oxygen therapy,'' the SEC said. As shareholders, they would be entitled to free lifetime treatments and were promised huge returns as similar clinics open nationwide, the agency's complaint said.
The SEC's case came after the Pennsylvania Securities Commission moved on Oct. 18, 1995, to order Lazare, Harley and Kube to cease violating state securities laws in connection with fraudulent sale of the company's stock. Nevertheless, Lazare sold two subscriptions for unregistered stock since that order, the SEC said.
A Lazare receptionist said Harley didn't have immediate comment on the SEC action. Charlie Bloom, an attorney representing Harley in the state case, didn't immediately return a telephone message seeking comment.