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Lab Rats

George Theodore was not expecting me. Judging by his what's-your-angle expression, this is not a pleasant surprise for the CEO of a Boca Raton company called University Lab Technologies. Before he will answer one of my questions, he has a few of his own. "Who are you?" is the first. "What do you want?" is his second. He knots his brow at the answers, as if they were riddles.

University Lab Technologies: The name evokes white-coated researchers squinting through microscopes or jostling one another as they carry beakers full of fluorescent, bubbling chemicals.

After all, this is the firm touting "Arthroleve," an over-the-counter pain reliever that just might work as well as Vioxx, only without those awful side effects. Another of its marquee potions is "Zenstral PMS," which offers women relief from menstrual cramps. Slogan: "We care about women, like no man can."

But University Lab isn't located on a college campus, and no one here looks the least bit scientific. The resident doctor, company President Jarret Morrow, who takes a seat beside Theodore, is a baby-faced 32-year-old with a TV anchorman's helmet of hair. He is Theodore's brother-in-law.

At 41, Theodore seems young for a CEO, and his day's stubble, untucked oxford, jeans, and flip-flops make him seem even younger. That, and the boyish sensibility that seems to inspire the office décor: A foosball table occupies its center; an oil painting of a curvaceous nude dominates the wall of Theodore's office. The rest of the space is so uncluttered and sparsely decorated that it's almost sterile.

Theodore and Morrow are both from Canada. They moved to South Florida about 18 months ago. Why?

"Different business interests," Theodore answers. In the silence that follows, he does not elaborate.

Arthroleve and Zenstral PMS are "nutraceuticals," dietary supplements in pill form that make medical claims like prescription drugs but that can hit the market without approval from the Food and Drug Administration.

Although Theodore is reluctant to talk much about his business plan, it seems evident that University Lab intends to go public as a "penny stock" — a small company that sells shares cheaply to investors willing to gamble that the company's products will be a hit with consumers. Theodore's two most recent jobs were executive positions with penny-stock companies. In both instances, he left just before the stock prices took a fall.

If Theodore seems a touch paranoid, maybe it's because in his brief career as an executive, he has known a vast array of conspiracies and corporate intrigues. Sure, I claim to be a reporter — but for all he knows, I'm a spy for his competitor or a federal investigator operating a sting or an agent of a former business partner he believes is out to destroy him.

Despite these hazards, over the course of the next 45 minutes, Theodore slowly warms to me. He cracks jokes and lets profanities fly. He compliments my intelligence and punctuates almost every sentence with my name, an effect that almost creates intimacy or at least makes Theodore seem at ease.

Yes, he says, there are two sides to the story. In this case, there is his version and that of the masked man behind the Internet postings that allege University Lab is nothing but an investment scam. Theodore claims that the accuser is Cesar Correia, Theodore's former business partner in a Toronto firm called Infolink. If that is so, then Theodore claims a credibility advantage over his cybercritic. Correia, after all, murdered his own father, went to prison, and then failed to disclose that later in his business career. That's a lot of baggage for a whistleblower.

Outside the office, on a balcony that overlooks a lushly landscaped courtyard, Theodore finishes a cigarette and grins unctuously. Suddenly, he's convivial enough to drape an arm over my shoulder as he asks, "You don't really think we're a scam company, do you?"

In the treacherous world of penny-stock trading, small companies with big ideas invite skepticism. Until they prove they're legitimate, investors must be cautious.

It must be noted, however, that Theodore has no criminal record, and there is no reason to believe he's perpetrating a fraud now.

Still, when it goes public — which may happen this fall — University Lab Technologies is likely to list its stock through the Over-the-Counter Bulletin Board (OTCBB) or on Pink Sheets. Neither are stock exchanges in the traditional sense. They are "quotation services" that provide a venue for trading low-value shares, known as penny stocks.

Penny stock is a literal term: Single shares of such companies can be purchased for as little as a cent. For this reason, penny stocks are seductive in the same way as slot machines and state lotteries: low cost, high reward. It is one corner of the stock market where you don't have to be wealthy to play — just willing to accept the long odds against winning.

Because penny stocks are cheap, they are easy to manipulate. A crooked dealer can buy millions of shares of the stock to inflate the price and create the illusion of an upward trend. That impresses naive investors who rush to buy in with the expectation that the stock price will continue to rise. But when the insiders sell their shares, it floods the market, and the price plummets.

That scheme, the classic "pump and dump," is hard to orchestrate on the New York Stock Exchange or NASDAQ because both markets are heavily regulated by the Securities and Exchange Commission. Company officers must publicly disclose their sales of shares and file audited financial statements, for instance.

Pink Sheets and the OTCBB, however, are almost impenetrable to both regulators and investors. Pink Sheets is not regulated by the SEC, while companies listing on the OTCBB have only modest reporting requirements. Since it's hard to get independent information on a small company, an investor has little choice but to rely on news releases by the company, which is free to exaggerate — even fabricate — its future prospects.

Often, that company is a shell — that is, existing as a legal entity that sells shares like a traditional company, only with no employees and no assets. Such companies may claim to be marketing a product that does not exist. If there is an office, it may be nothing more than a "boiler room" in which salesmen make cold calls, send junk faxes, or spam messages.

Florida, notoriously, is a magnet for these kinds of unscrupulous dealers, and they're particularly common here at the bottom of the peninsula. It may be more than just the warm weather. "The proximity of South Florida to some of the offshore banking havens makes it an easy venue for people who do their banking back and forth," says Hartley Bernstein, a New York City-based attorney who operates a watchdog website called He's referring, of course, to Caribbean nations whose banks are traditionally more accommodating to crooked businessmen looking to hide dirty money.

While swindlers may make South Florida their home, that doesn't mean they'll make South Florida residents their victims. "They wouldn't necessarily sell [worthless stock] to Florida," Bernstein says. "Their clients will be in Oklahoma or Indiana." Then, in the event that Midwesterners cried foul, regulators in those states would have to contact regulators in Florida, causing bureaucratic confusion. "The more complex it gets in terms of regulation, the harder it is to catch people," Bernstein explains.

Those difficulties multiply when a company is based in another country or when it is based here but selling securities to international investors. Pink Sheets and the OTCBB both allow companies around the world to sell stock. Recent trends show that shell companies based in Theodore's old stomping ground of Canada are feasting on American investors and vice versa.

"The regulators do the best job they can, but they're outnumbered and out-financed," says Kenneth Vianale, a Boca Raton attorney who represents defrauded investors.

One of those regulators, the Florida Office of Financial Regulation's Robert Kynoch, admits, "We really don't have a lot of reach when [the fraud] is in other countries." To build a criminal case, an investigator needs to be able to enforce a subpoena for the accused company's financial records; but the home nation may not cooperate, especially if there is no evidence the company has committed fraud domestically.

Adding to the frustration is the fact that many of the victims never report the crimes, either because they're ashamed of having been swindled or because they assume the company's officers made an honest effort. "Sometimes they just chalk it up to an idea that didn't work," Kynoch says. "The marketplace didn't like [the product] and [the stock] goes bad." In these cases, the swindlers make a clean getaway.

Kynoch's advice for investors isn't surprising: Avoid investment ideas that come from spam, cold calls, or brokers not registered by federal agencies. And if you want to really find out about a penny stock, Kynoch suggests an old-fashioned investigative technique: an unannounced visit to the headquarters of the firm.

By industry standards, it is a point in University Lab's favor that its CEO and president can both be found at the Boca Raton address listed on its website.

And the products it claims to market are real: Packages of Zenstral PMS and Arthroleve are stacked in the office. The packages' labels clearly disclose that the products' aren't subject to the approval of the FDA — another sign of University Lab's integrity.

Clinical research, however, has found little connection between glucosamine, the main ingredient of Arthroleve, and reduced pain from arthritis, just as researchers have given lukewarm reviews to magnesium oxide, the main ingredient in Zenstral, when it comes to alleviating PMS. Still, these products appear to be as legitimate as any in the often dubious market of alternative medicine, which has always clashed with traditional medicine.

It seems fishy that the University Labs website does not promote Dr. Morrow's research credentials as much as his Mensa membership. But a call to the University of Alberta Alumni Association confirms that Morrow indeed graduated with an M.D. in 2001. So University Labs is backed by at least a single qualified physician. The website names several other doctors and researchers who serve on the University Lab medical advisory board, and their credentials check out too.

On his laptop, Theodore cues up a television commercial: A middle-aged man in a tuxedo approaches a statuesque woman in a red dress, extending his hand. She takes it, leaving behind a table full of men who ache and squirm with the pain of their untreated arthritis. The debonair gentleman and his elegant lady tango, as a voice-over extols the pain-killing virtues of Arthroleve.

The ad has already aired on the Discovery Channel and MTV2, among other basic cable networks, Theodore says. The commercial bolsters the notion that University Lab is legitimate.

But just a few months after University Lab's incorporation, a post appeared on the messageboard for a website called, for armchair investigators who like to bust scams. The poster used the name "Bryan Swan" and claimed to be an ex-stockbroker who had been solicited by University Lab to buy stock. This, he said, caused him to start an investigation of the company.

The poster alleges that University Lab is a "pump and dump" company that in news releases would hype products that did not exist. This latter claim is demonstrably false; the products do exist, though they hadn't been manufactured at the time of the Swan post.

Another claim — that the products' patents are phony — is also questionable. Theodore showed me copies of the patent applications.

The post, however, may contain assertions that, whether true or false, cast doubt in the minds of prospective investors. In particular, it raises concerns about Theodore's business activities in the penny-stock game — and questions about what he did in Canada that precipitated his migration to Florida.

It's not necessary to rely entirely on Theodore's version of events or on the version put forth by an anonymous Internet poster. The choicest, most credible clues about what really happened behind the scenes can be found in Canadian court reports.

The story begins at Infolink, a company founded by Cesar Correia in 1993 that specialized in marketing via unsolicited phone calls, e-mails, and faxes, sometimes called "junk advertising." Theodore began working for Correia in 1995, and to hear Theodore tell it, the pair weren't close. "When you work with somebody, you don't have to think highly of them," he says. "You just have to respect them for their knowledge."

In 2002, Infolink stock was surging, a trend that coincided with its acquisition by the Toronto Stock Exchange, which like the New York Stock Exchange has an arm that operates as a for-profit corporation, recruiting venture firms that show enough promise to eventually meet the standards for listing there.

It's at this critical point that Infolink's fortunes take a turn for the worse — and where Theodore's story drifts from those of Canadian authorities. He claims that in the course of doing background investigating before the acquisition, Toronto Stock Exchange officials made a grisly discovery: Correia had murdered his father in 1984, entered a guilty plea to manslaughter, then served a ten-month prison sentence. He failed to disclose these salient facts in his filings as an officer for a public corporation.

"They called me and said, 'We found out your partner murdered his father in 1984, and we can't do this deal,' " says Theodore, adding that the Toronto Stock Exchange deal might still have gone through had Correia resigned but that Correia refused to do so.

This story, however, doesn't jibe with the findings of a monitor who was appointed in 2004 by Ontario's Superior Court of Justice. Toronto Stock Exchange officials told the monitor that they had not discovered the manslaughter conviction and that they had other reasons for not following through on the Infolink acquisition. (Those other reasons are not specified in the monitor's report.)

None of these issues were made public at the time, however, and by late 2002, the price of Infolink stock showed spectacular growth: The company's price per share multiplied by a factor of five in just a few months, up from about ten cents per share to more than 50.

But by December of that year, the stock took an even more precipitous dive. Soon, the shares were back to ten cents and lower. In the five years since, Infolink shares have stayed below ten cents per share.

"The stock fell off the cliff," Theodore says.

He says that company officers had been trying unsuccessfully to persuade Correia to resign. When Correia refused, Theodore says that around November 2002 — just as the stock price was peaking — he left the Infolink offices never to return.

He says his exit caused panic by shareholders that caused the stock's plunge. "If that company had any personality — believe me — it resided in me," Theodore says. "The phone was ringing off the hook, and shareholders were saying, 'Where's George?' "

He still hadn't formally severed ties with Infolink and he wouldn't leave without a fight, not to mention a generous severance package. In exchange for that, Infolink wanted a confidentiality agreement. Theodore summarizes the company's negotiation this way: "Keep your fucking mouth shut. Here's half-a-million dollars. Now go away."

Theodore did go away, but he soon resurfaced at a company called ActiveCore, another small technology firm in Toronto. ActiveCore had been focused on developing a method for moving cash purchases electronically — like PayPal, except without the fees. At some point after Theodore's arrival, ActiveCore began moving into Infolink's turf of direct marketing.

In December 2003, ActiveCore moved to buy controlling stock in Infolink. According to the monitor's report, this marked the start of a round of corporate sabotage by Theodore and his new colleagues at ActiveCore.

The monitor's report cites an affidavit filed by an Infolink board member, Stewart Wright, who claims that ActiveCore sought to "bribe" him with a $400,000 payment under the guise of a consulting agreement. In exchange, the report says, Wright was to give ActiveCore 6 million shares of Infolink stock he controlled, appoint two ActiveCore surrogates to Infolink's board of directors, and finally terminate Correia.

Wright didn't make the deal, and ActiveCore's hostile takeover bid collapsed. But ActiveCore had another weapon at its disposal: George Theodore, a man who knew a thing or two about Infolink.

By May 2004, anxiety was rising among Infolink executives. As the monitor put it in his report, "Mr. Theodore was, after a period of quietude of some 16 months, again raising his previous allegations" related to Correia's criminal history.

"[P]erhaps Mr. Theodore was now attempting to force Mr. Correia to buy Mr. Theodore's bloc of shares," the monitor wrote.

Correia and Infolink wouldn't budge.

Later that same month, Infolink officers would field an even-less-subtle threat: an e-mail from an ActiveCore executive that mentions how Theodore had made ActiveCore aware of "some issues... which, if true, is quite disturbing," according to the monitor's report. The executive, says the report, "suggested that this might result in a price decline for Infolink shares and offered to 'buy control of Infolink.' "

So it seems more than coincidence that exactly a week after this note, Canada's biggest daily newspaper, the Globe and Mail, blew the lid off Correia's dark secret.

On May 29, 2004, an 1,800-word article ran under the headline, "CEO's killer past comes back to haunt him." The piece credits Theodore with exposing Correia's crime through letters sent to Infolink board members and the Ontario Securities Commission, which regulates public companies in the province.

It's hard to envision an article more devastating to a company's fortunes. Its second paragraph says, "many shareholders don't know that 20 years ago, Mr. Correia picked up a baseball bat and smashed his father's head while he was fixing the family car at their home in Winnipeg."

It continues, "As Joachim Correia went down, his son hit him three more times. Then he got a smaller bat and hit him again." The article describes how Correia then rolled his father's body in a carpet, put a plastic bag over his head, then deposited the body in a river.

Testimony from Correia's mother, the article says, convinced the judge that Joachim Correia was abusive toward his son and wife. The judge cited this as a factor in Cesar Correia's sentencing.

In the years after he left prison, Correia graduated college and received a pardon for his crime. He told the Globe and Mail that this was the reason he did not disclose it in public filings and maintained that the case had no bearing on his fitness to run a public company.

In June 2004, an Infolink shareholder named John Holden sued the company, in part for Correia's failure to disclose his criminal past. Theodore's fingerprints show up on that lawsuit as well. According to the monitor's report, Stewart Wright, the Infolink executive, said Holden and Theodore were friends who had worked together at a company that would later be acquired by ActiveCore. He called Holden a "straw man" for Theodore.

The monitor expressed concern in his report that there may have been "unlawful collusion" between Holden and ActiveCore executives. The report cites an affidavit by Holden as revealing that "Mr. Theodore was the source of Mr. Holden's concerns about Infolink and Mr. Correia."

Theodore denies egging on Holden or any other shareholders — he was still bound by that confidentiality agreement, after all. (Holden's attorney did not return calls for comment.)

"But I told them, 'You need to ask questions, look further into it,' " Theodore says. "I wasn't going to come out and tell them [about the murder] because I was a private citizen at that time," not an Infolink executive. Had he been an Infolink executive, he says, he would have been obligated to disclose Correia's past in order to keep faith with shareholders.

About the same time that Holden sued Infolink, Infolink sued ActiveCore, alleging that ActiveCore had exploited Theodore's former position at Infolink to gain an unfair advantage in its acquisition bid. The dueling lawsuits remain active, and for that reason, the individual filings by the two sides are not available to the public. Executives and attorneys on both sides either refused to comment on the cases or failed to return calls.

Far away from the treachery that took place in Canada, Theodore is sitting at the CEO's desk at University Lab, asking a million-dollar question: "Did Cesar talk to you?"

He hopes so. But Correia did not return my phone calls or e-mailed inquiries for this article, probably because Correia didn't want to give Theodore a chance to refile his libel suit against him.

That suit, which landed in Florida Southern District Court this past May, accused Correia of writing defamatory messageboard posts under the pseudonym Bryan Swan. In the complaint, Theodore's attorney attached a transcript of a phone call allegedly made to Ken Silberling, whose company leases the office space that is University Lab headquarters.

The caller is Cesar Correia, and the transcript suggests he is pretending to be interested in leasing space at Peninsula Corporate Circle but wants first to know whether his competitor, ActiveCore, is close by. At one point, Silberling asks the caller if he's doing "a little corporate espionage."

"Yeah, well, you got to... keep on top of these things...," the transcript quotes the man identified as Correia. "We compete with them up here, so..."

Theodore alleges in the complaint that the transcript was mailed anonymously to him in an effort at intimidation.

The case was dismissed in June based on Theodore's failure to prove that the alleged online defamation took place in Florida.

Was Correia curious about a link between Theodore's new company, University Lab, and his previous one, ActiveCore? The answer comes in one of the more explosive allegations from the mysterious Bryan Swan. He claims that Theodore is playing a shell game, that University Lab was "created, produced, set up, and funded by ActiveCore. This is called misdirecting funds from a public company to a private company, and to the personal benefit of George Theodore." And this, if it is true, constitutes fraud.

There is no doubt that Theodore retains a tight relationship with ActiveCore. He leases the office space in Boca Raton from ActiveCore and remains a paid consultant for the company. But Theodore denies that ActiveCore financed University Lab.

"ActiveCore has made many investments, which have been disclosed in their filings," he says. "You can't make off-the-book investments. That's illegal."

So where did the cash come from?

"My own personal money," Theodore says.

ActiveCore President and CEO Peter Hamilton also said his company had no stake in University Lab, but the denials aren't enough to ease the anxieties of ActiveCore investors.

Over the past year, ActiveCore stock has sunk to its lowest level, at the same time that its former vice president, Theodore, has been using ActiveCore-leased office space and churning out two lines of nutrition supplements.

New Yorker Gregory Sabba bought ActiveCore stock about five years ago, when it was selling at about 1.5 cents per share. "At first, I made a killing," Sabba says. When the stock climbed to 4 cents, he more than doubled his initial investment.

The luckiest investors held onto their ActiveCore stock till it hit the 20-cent mark, in early 2005. The stock has been heading south ever since. In mid-August, it was trading at about a half-cent per share. "Look at the charts," Sabba exclaims. "You couldn't ask an Olympic skier to jump off that!"

Sabba posts on a messageboard for ActiveCore, hosted by, a site for shareholders of small stocks. Black humor has been the only humor on that board this year. The community is largely divided between two camps: the pumpers and the bashers. The pumpers accuse the bashers of being the paid agents of ActiveCore rivals, while the bashers wonder whether the pumpers are insiders trying to inflate the stock so they can sell, cutting their losses.

Sabba wonders who in this climate could still cling to any belief in ActiveCore's future — unless that person was only feigning enthusiasm. "You buy a 20-cent stock that goes to a penny, you're not optimistic anymore," he says. "You want to kill somebody."

"Blacksnake" is the only poster who seems to be enjoying the messageboard. He (or she) seemingly has boundless energy for ridiculing the pumpers and for bilious tirades against ActiveCore officers.

Other posters have speculated that Blacksnake, who didn't respond to a message I posted on the Agoracom board, is Bryan Swan and that they are both Correia.

There's so much paranoia on the board that posters questioned my motives. "I think you're a guy that got fucked over by George Theodore and you're going to write an article to get him back," an investor named Steve Tracy told me.

Investors like Tracy are blue-collar people. When their penny stock hits the skids, it hits them hard.

"I'm a carpenter," says Tracy, speaking on a late July afternoon. "I just got done pounding nails in 95-degree heat. I just want to sell my shares and get out."

From the looks of it, life is a little easier these days for Theodore. He's living in a $2 million home in a tony subdivision on the outskirts of Boca Raton, which he purchased under his real surname, Theodoropoulos. But he can't have much time to enjoy his wealth. Trouble seems to follow him — and it's already struck his new company.

In April, the Canadian province of Saskatchewan issued a cease-trade order for University Lab based on evidence that the company was selling securities to investors without having first registered its stock with the Canadian financial authorities.

That registration process involves the filing of a prospectus that describes the enterprise and gives a detailed history of the company's officers, whose backgrounds are thoroughly investigated. It is an expensive endeavor, costing roughly $100,000 in fees, but in Canada as well as the United States, it's the first sign that the company is accountable and operating in good faith.

The converse may also be true: Companies that try to circumvent the registration process are stigmatized by the possibility they're scams. It's the reason that financial regulators make public their cease-trade orders. "It's a major-league flag," says Scott Boyle, assistant manager of investigations for the Ontario Securities Commission.

In University Lab's Saskatchewan case, its salesmen are alleged to have contacted 250 to 2,000 residents of the province, touting shares that can be had for 50 cents apiece now and that will sell for up to $10 apiece within a year. In the April 14, 2007, news release, investigator Ed Rodonets says of University Lab solicitors: "They're asking $25,000 minimum. There are some $25,000 investments, we know that for sure."

Since his investigation of University Lab is active, Rodonets could not elaborate on the complaints he's received, and the documents are not public.

The Saskatchewan investigation started a domino effect. On June 8, the Alberta Securities Commission entered a cease-trade order against University Lab, based on its finding that the company had been illegally selling shares since February, raising $250,000 total from 15 Alberta residents.

Then, on June 21, the British Columbia Securities Commission issued its own cease-trade order, based on similar allegations made by residents of that province. The province of New Brunswick has placed University Lab on its "Caution List" for companies that are not registered to trade securities but that have made solicitations to New Brunswick residents.

And now, Florida regulators are getting in on the act. A representative of the state's Office of Financial Regulation confirmed that there is an active investigation against University Lab Technologies.

Theodore says he's not sweating it; the Saskatchewan case was a misunderstanding. "We had a prospectus that a lawyer up there prepared for us. That attorney failed to register the prospectus in that province." The cease-trade order, he says, "isn't a big deal. It basically means: 'Don't sell this stock here till you're properly registered.' "

But when a lawyer fails to file a prospectus, it's easily fixed. In Canada, a cease-trade order remains temporary for two weeks, during which time a company can rectify the matter. University Lab declined to do so.

Asked whether he'll show me the University Lab prospectus, Theodore says, flatly, "No."

In July, Theodore told me that University Lab will go public in August. By August, he says those plans are on hold.

A few weeks after my surprise visit to University Lab headquarters, Theodore is no longer feeling so fraternal. During an interview when uncomfortable questions are asked, he tells me flatly, "I'm very litigious."

A moment later, he answers a question with a threat: "I just hope that whatever you're doing, you have all your facts, because if there are any inaccuracies, I'm coming for you."

Theodore is frustrated, he says, by the idea that anyone would put credence in the accusations of "a murderer," his preferred way of referring to Correia, rather than in him.

But for those who have put money into businesses associated with Theodore, it's not as clear-cut a choice as he would hope.


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