SEC SLAPS MENTAL HEALTH BIZ FOR WHITE-COLLAR STOCK CAPER

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It’s not every day that the dowdy social service sector meets the tawdry glamour of shady stock deals. But last week, the sharpies got slapped for playing in a decidedly downmarket business: providing drugs for mental patients released from state hospitals and jails.

On May 25, the New York-based company American HealthCare Providers, Inc. (ticker symbol AHEA) announced that it had secured a year-long, $23 million contract with several New York City agencies. In exchange for the money, the business would provide medications to mental patients after their release from jails or hospitals. Within days, the firm’s stock doubled, leaping from 23 cents a share to 47 cents.

The press release claimed the contract was “authorized” by three city agencies, including the Department of Correction and the Department of Mental Health. But both of these agencies said they have no dealings with the company, and furthermore aren’t even in charge of arranging these services.

Likewise, the government agency that actually is in charge of providing medical care for ex-inmates, the Health and Hospitals Corporation, said they had no contract with American HealthCare Providers. The third supposed party to the contract–the New York City Link program, whose director is quoted in the press release–failed to return phone calls from City Limits.

Then, last Thursday, the federal Securities and Exchange Commission suspended trading in the stock, citing questions about “the accuracy and adequacy of publicly disseminated information” from the company.

The firm’s spokesman, M. Anthony Lester of Prucent Business Strategies Group, refused to comment on the press release or the SEC suspension, saying only that a company attorney was “vigorously pursuing” the matter. Calls to CEO Arthur Wheeler at his home on the Upper West Side were not returned.

According to Lester, the company’s main business is supplying medications to a group of private mental health clinics in the city. AHEA has also announced the pending purchase of Amadeus Pharmacy, a Manhattan business, and the imminent launch of an e-commerce pharmacy Web site, RxNet2000.com. An earlier plan to merge with ThermaCell Technologies, announced with great fanfare, fell through after ThermaCell execs publicly complained that “it has been very difficult to obtain financial information from American HealthCare Providers.”

Mental health advocates scoffed at the idea that their stock in trade could send stock skyrocketing. “I’ve seen stock hoaxes before, but I’ve never seen a stock hoax for mental health care,” laughed Joshua Rubin of the Coalition of Voluntary Mental Health Agencies. “As any mental health care provider can tell you, that’s not where the bucks are.”