Sec Questioning Lifeline Reporting; Stock Trading

Article excerpt

NEW YORK - It was one of the more dramatic stock moves of 1989. The Lifeline Healthcare Group, a home health care company, saw its stock rise from below $4 a share to above $30, then fall back to $15.

Lifeline, which provides nursing and other services to patients at home, bitterly complained about the decline, becoming one of the more vocal companies to denounce what it viewed as unfair tactics of short-sellers.

It set out to counter the short-sellers with one of the most unusual strategies ever undertaken by a company - a stock split that applied only to some shares.

Wednesday, the Securities and Exchange Commission stepped in and halted trading in Lifeline for 10 days. But the SEC announcement left the impression that it was not the short-sellers whose tactics had aroused the ire of government regulators, but those of the company itself.

The SEC announcement cited, among other things, worries about how the company had handled the stock split and about whether there was complete disclosure regarding major owners of the stock.

Lifeline, based in Broken Arrow, Okla., has had its problems with financial reporting. It has twice filed amendments to its annual report, changing its reported balance sheet for Dec. 31, 1988.

Lifeline reported profits of 75 cents a share in the first quarter of this year, compared with 63 cents a share for all of 1988, but attributed the bulk of the first-quarter earnings to extraordinary items.

Those profits may be open to question. The SEC cited questions about the value of company assets, the methods of accounting for operations and the way Lifeline reported acquisitions.

For a period this year, Lifeline retained a felon to represent it in the financial community, the company's lawyer, Cecil Mathis of Dallas, said. He said the consultant, Charles J. Bazarian, had been convicted in a Florida case involving fraud at a bank.

Bazarian, whose conviction was upheld by a federal appeals court in May and who faces a two-year prison term, could not be reached for comment. He has an unlisted telephone number in Oklahoma City.

Bazarian owns CB Financial Corp. of Oklahoma City.

Lifeline's president, Michael L. Anderson, said the company had not known of Bazarian's past when he was retained but that he took no action when he learned of it because ``those activities were not involved with our company whatsoever.'' He said Bazarian was paid with 400,000 common shares.

Lifeline first started getting substantial attention when its stock began to zoom upward, amid talk of a short squeeze. …