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SEC filed suit against owners of Skin Nuvo
By MSP Staff | Published 12/16/2005 | Business Trends , Legal News , Ongoing Law Suits |
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SEC filed suit against owners of Skin Nuvo

The Securities and Exchange Commission filed a lawsuit Wednesday accusing two Southern Nevada men and a former pastor from California with securities fraud at Henderson-based Skin Nuvo International.

The defendants are accused of raising $11 million from 65 investors using false financial information about profits at specific Skin Nuvo cosmetic shops. The company once operated a cosmetics shop at the Fashion Show mall. It also had locations in San Francisco, Los Angeles, Portland, and Spokane.

The shops did laser hair removal and Botox procedures but not face-lifts, the SEC said.

The commission's complaint, which was filed in San Francisco, names Nuvo co-founder Jeffrey Schmidt, 45, of Henderson; chief operating officer Norman Valine, 39, of Las Vegas; and Gary Gelnette, 51, of Concord, Calif., as defendants.

Gelnette declined comment. Valine's attorney, Gordon Young of San Francisco, declined comment because he had not read the lawsuit. Attempts to reach Schmidt failed.

The lawsuit says Schmidt told investors that their money would finance specific new Nuvo locations, but he spent the money to prop up the failing business, pay executives including $680,000 to himself, and pay previous investors to create the impression of profits.

"Schmidt ran Nuvo almost like a Ponzi scheme, using new investor funds to pay previous investors and induce further investments," said Marc Fagel, the SEC's associate district administrator in San Francisco.

Mark Fickes, an attorney in the SEC's enforcement division, added: "The big message is they both were trading in illusions in their investments and what they were selling to the public."

Schmidt gave investors false income statements that showed the retail locations were more profitable than they were between 2002 and 2004, the SEC said.

The complaint alleges that in 2004 Gelnette helped raise $1.35 million from a former parishioner while Valine got $138,000 in commissions by selling Nuvo interests to four other investors. The investors were in Nevada, California and the Pacific Northwest.

SEC officials declined to identify the investors but said one borrowed from a Las Vegas bookmaker for an investment. Another investor used all the funds in his family retirement account. They invested sums ranging from $100,000 to $1.35 million before the company filed for bankruptcy protection in March.

The SEC is asking a federal judge to order the defendants to disgorge "ill-gotten gains," pay civil penalties and not to conduct a similar operation.

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