SEC Sues Skin Nuvo: False promises & bankruptcy.

nuvo17.jpgMedical spa franchises are getting a lot of bad press lately. The Wall Street Journal article: Medspa boom is a bust for some being just the latest. 

Last year Skin Neuvo made some waves by opening a lot of locations. It would seem that Skin Neuvo's fouders were building a business on a foundation of lies, false promises, and fraud. I would think that Ron Berglund might be right when he predicts a 'huge shakeout' in the medical spa market next year.

From the story: Three men, including a Concord resident, were sued by the Securities and Exchange Commission on Wednesday on charges that they swindled more than $11 million from investors in a skin-care business that later filed for bankruptcy.

Jeffrey Schmidt, 45, of Henderson, Nev., the co-founder of Skin Nuvo International, falsely promised investors profits of up to 40 percent, knowing that the company was in precarious financial shape, according to a suit filed by the SEC in U.S. District Court in San Francisco.

Norman Valine, 39, of Las Vegas, Skin Nuvo's former chief operating officer, and company co-owner Gary Gelnette, 51, of Concord raised money from new investors even after suspecting that Schmidt may have embezzled funds and falsified financial records, the suit said.

Gelnette, a former pastor, helped raise $1.35 million from a then-parishioner in 2004, authorities said. Valine earned $138,000 in commissions by selling Skin Nuvo interests to four additional investors, and Schmidt paid himself more than $680,000 and Gelnette about $260,000, the SEC said.

"Rather than using investor funds to finance new stores, as promised, Schmidt used the money to pay the debts, construction costs and payroll for the older stores," the suit said.

The SEC suit seeks to bar the men against any future violations of securities laws, a civil monetary penalty and the recovery of any ill-gotten gains.Se