Update: July 4
On June 25, Lotz filed a response to PreveCeutical’s notice of claim.
Lotz states that PreveCeutical and Van Deventer “engaged in discussions with the BridgeMark Group with respect to the provisions of ‘consulting services’ to PreveCeutical.”
Lotz states the BridgeMark Group proposed to buy $4 million of shares in exchange for a $4 million consulting contract but Van Deventer negotiated to $2.7 million worth of “consulting services.”
Thereafter, Lotz states Van Deventer asked him if the group could use a consultant exemption to buy unrestricted shares (otherwise the shares would be restricted for re-sale for a period of time).
Lotz states he went to the commission to inquire and that the commission told Lotz that the company could use the exemption so long as the consultants met the definition of a consultant — a determination not made by Lotz.
With respect to the press release, Lotz states he was consulted and assisted in drafting it. But, states Lotz, “the obligation to ‘ensure’ that news releases and material change reports are accurate lay entirely with the management of the company.”
Lotz states that while Van Deventer “intentionally withheld” the contract details from Lotz, even if that information was disclosed to Lotz, “there was no precedent indicating that the precise allocation of funds from a company’s working capital must be disclosed in such a News release and Material Change Report…”
Lotz states the omission of the consulting contract funds coming from the sale of shares was not found by the commission panel to be a misrepresentation. What was found to be misleading, Lotz noted, was “the degree of divergence between historical patterns of spending on consultants compared to the amount being spent from the private placement combined with the failure to disclose ‘how much money’ was going to consultants.”
Lotz states he could not have known the news release would be misleading considering he wasn’t informed of the details.
Lotz also pleads statute limitations considering PreveCeutical was aware of civil proceedings for the same allegations in July 2019.
Original: June 8
A company that once claimed it was developing technology based on scorpion venom has filed a civil claim against the firm’s former lawyer, claiming he is responsible for a controversial press release found to have contained misrepresentations.
Headed by CEO Stephen Van Deventer, PreveCeutical Medical Inc. was one of 11 companies listed on the Canadian Securities Exchange that was initially embroiled in the Bridgemark Group consulting case dating back to a hearing notice on Nov. 26, 2018.
The B.C. Securities Commission dropped its allegations against most of the group but ultimately alleged PrevCeutical made misrepresentations in a news release. However, a panel of adjudicators ruled on May 2 that the news release was only misleading and not a misrepresentation in a legal sense, as it did not have a material impact on investors.
Van Deventer and his company are suing their former lawyer, Jonathan Lotz, because he wrote the news release and in doing so “breached the standard of care by failing to provide any warning in relation to those disclosures,” according to the claim.
“As a result of the defendants’ breach of the standard of care, the plaintiffs have suffered various damages due to, among other things, their exposure to regulatory proceedings arising from the Notice of Hearing and the finding of the British Columbia Securities Commission that the news release and the material change report contained misrepresentations,” the claim states.
“PreveCeutical would not have issued the news release or material change report in their issued form had the defendants warned that doing so came with legal or regulatory risks or a risk of exposure to regulatory proceedings,” the claims adds.
Lotz has retained John Dives K.C. to defend against the allegations.
Dives told Glacier Media Lotz intends to file a response denying all the allegations and making clear his version of events.
The claim stems from 2018 when the company raised $6.5 million without disclosing it already paid or committed to pay approximately $3.2 million to consultants, who in turn bought millions of dollars worth of shares. The commission alleged a group of consultants had done the same with 11 companies, only to do little or no work.
Collectively, the scheme involved $52 million of share purchases, according to the commission.
At the time, PreveCeutical claimed it was developing technologies related to scorpion venom. It says it is now developing “innovative options for preventive and curative therapies utilizing organic and nature identical products.”
The company now trades at 2.5 cents per share.
