Allegation notice. Allegations from the cited record; outcomes noted where adjudicated.
back to the report related scheme
CIK 0001059577 · MW Medical / Genesis

MW Medical → Davi Skin — The Bankruptcy Reconcentration

MW Medical, Inc. (CIK 0001059577) was spun out of Dynamic Associates on 25 February 1998 via a 1:1 distribution that mirrored the insider register into a fresh reporting shell — Jan Wallace as President/CEO/Director, ~48% to Michael (later Kyleen) Cane. Its “microwave dermatology” business was window dressing; the Genesis Health Management subsidiary's $49.3M Medicare revenue supplied the commercial veneer. Wallace then manufactured a $615,871 secured-creditor position against her own company, drove it into Chapter 11, and converted $375,000 of the insider note into 74,000,000 shares at $0.005 — extinguishing every outside holder and emerging with the shell that became Davi Skin.

Listen to this brief
1

How it worked

MW Medical is the bridge scheme between the Dynamic / LATI pipeline and the Davi Skin offshore liquidation, and it shows the enterprise's bankruptcy-reconcentration mechanism in pure form. Wallace sat on both sides of the debt — CEO and largest secured creditor — via promissory notes to herself and Grace Sim. A receiver 8-K (Nov. 29, 2001) preceded the Jan. 22, 2002 Chapter 11 report and the Jan. 25, 2002 voluntary petition (No. 2:02-bk-01090-RTB, Bankr. D. Ariz.). The Feb. 4, 2002 Joint Plan of Reorganization and the FY2002 10-KSB then converted $375,000 of the self-dealt note into 74,000,000 shares at half a cent — debt the insiders created becoming the equity the insiders kept, while the bankruptcy erased the outside shareholders. The reorganized shell emerged via a 1-for-500 reverse split, was sold to Parrish Medley as “Davi Skin,” and Wallace's retained note became the weapon used to seize it back.

Open the filed qui tam complaint at this section — the operative pleading (United States ex rel.), jumped to the matching allegation; the filed PDF is one click away.

2

Forensic brief

The complete forensic brief behind this summary — the full record with exhibits. Page through it below, or open it larger for the document summary and key relations.

Forensic brief — MW Medical → Davi Skin 1 / —
loading page…
3

Spun out of Dynamic: a fresh reporting shell

MW Medical, Inc. did not begin as a company — it began as a copy of a shareholder register. On 25 February 1998, Dynamic Associates filed a Form 8-K announcing the spin-off of MW Medical through a 1:1 share distribution that mirrored the Dynamic register into a separate Nevada reporting shell, CIK 0001059577.14 Jan Wallace was installed as President, CEO, and Director; roughly 48% of the new shell flowed to Michael (later Kyleen) Cane, who signed filings as “Michael A. Cane.”

The spin-off created a second public vehicle out of the first — same control group, same insider register, a fresh CIK and a clean reporting history. MW Medical’s only function was to be a reporting shell the enterprise could operate, hollow out, and re-float, exactly as it had done with Dynamic / LATI.

  1. Dynamic Assocs., Inc., Current Report (Form 8-K) (Feb. 25, 1998) (MW Medical spin-off; 1:1 distribution into CIK 0001059577); SEC Form 10-SB, MW Medical, Inc. (Sept. 14, 1998), Accession No. 0001059577-98-000001.
4

The Genesis / Medicare veneer

A shell needs a story. MW Medical’s “microwave dermatology” business was window dressing — by 2002 it had halted all research and was openly “seeking a reverse merger partner.” The operational narrative came instead from the family’s Genesis Health Management subsidiary, which ran up to 26 geropsychiatric hospital units across four states (LA, AR, MS, TN) with 100% of operating revenue from Medicare billings.6

By the LATI annual report for the fiscal year ended April 30, 2002, Genesis was reporting a $49.3 million Medicare revenue veneer — a functioning-healthcare appearance layered over what was structurally a blank-check vehicle.7 The healthcare operations supplied SEC-filing credibility and a sales pitch for the shell; they did not prevent its use as an unregistered-securities and bankruptcy-reconcentration instrument.1

  1. Dynamic Assocs., Inc., Annual Report (Form 10-KSB) (FY ended Dec. 31, 1999) (Genesis: up to 26 geropsychiatric hospital contracts across LA, AR, MS, TN; 100% Medicare-billed revenue); Legal Access Techs., Inc., Annual Report (Form 10-KSB) (FY ended Apr. 30, 2002) ($49.3M Medicare revenue veneer).
5

Manufacturing the sole secured creditor

The mechanism that would let the enterprise keep the shell through bankruptcy was a self-dealt secured note. MW Medical’s filings document promissory notes running to Jan Wallace and Grace Sim that built a claimed $615,871 secured position against the shell.18 Wallace was simultaneously the company’s CEO and its largest creditor — the same person on both sides of the debt.

The CEO becomes the sole secured creditor of her own company — so that when the company is driven into bankruptcy, she is first in line to take it back, ahead of every outside shareholder.MW Med., Inc., Current Report (Form 8-K) (Mar. 15, 2003) (promissory notes; $615,871 secured position)

This is the enterprise’s signature move, identical to the $200,000 note Wallace would later hold over Davi Skin: the secured-creditor position is not financing — it is a pre-positioned claim on the corporate shell itself.1

  1. MW Med., Inc., Current Report (Form 8-K) (Mar. 15, 2003), Accession No. 0001075793-03-000161 (Wallace / Sim promissory notes; $615,871 secured position).
6

Chapter 11: extinguishing the outside holders

With the secured position in place, the shell was driven into bankruptcy. A receiver 8-K issued 29 November 2001, and on 22 January 2002 MW Medical reported its Chapter 11 filing;11 the voluntary petition (Form 1) was filed 25 January 2002 as In re MW Medical, Inc., No. 2:02-bk-01090-RTB (Bankr. D. Ariz.).13

The bankruptcy was not a failure event — it was the tool. Chapter 11 let the enterprise extinguish the outside equity holders who might have asked questions, while Wallace’s manufactured secured-creditor position guaranteed the control group emerged owning the reorganized shell. The shareholders who funded MW Medical were wiped out; the operators kept the listing.1

  1. SEC Form 8-K, MW Medical, Inc. (Nov. 29, 2001) (receiver); MW Med., Inc., Current Report (Form 8-K) (Jan. 22, 2002), Accession No. 0001075793-02-000009 (Chapter 11 petition); Voluntary Petition (Form 1), In re MW Med., Inc., No. 2:02-bk-01090-RTB (Bankr. D. Ariz. Jan. 25, 2002).
7

The 74,000,000-share reconcentration

The Joint Plan of Reorganization, filed 4 February 2002, executed the reconcentration in numbers.12 Per MW Medical’s annual report for the fiscal year ended December 31, 2002, $375,000 of the insider note was converted into 74,000,000 shares at $0.005 — with a remaining convertible balance of $570,775.30 still hanging over the shell.19

Convert a $375,000 self-dealt note into 74,000,000 shares at half a cent, and the control group owns the reorganized company outright — debt the insiders created becomes the equity the insiders keep, while the bankruptcy erases everyone else. The $0.005 conversion price is the signature of design, not arm’s-length financing.

  1. Joint Plan of Reorganization, In re MW Med., Inc., No. 2:02-bk-01090-RTB (Bankr. D. Ariz. Feb. 4, 2002); MW Med., Inc., Annual Report (Form 10-KSB) (FY ended Dec. 31, 2002), Accession No. 0001075793-03-000317 ($375,000 note converted to 74,000,000 shares at $0.005; remaining convertible balance $570,775.30).
8

Emergence: the shell becomes Davi Skin

The reorganized MW Medical shell — cleansed of its outside shareholders and re-concentrated under the control group — emerged via a 1-for-500 reverse split and was sold in 2004 to entrepreneur Parrish Medley, who renamed it Davi Skin, Inc. and brought in Carlo Mondavi as co-founder, believing he had bought a clean company.1

Wallace had retained a $200,000 note over the reorganized shell — the same weapon, re-armed — and within two years deployed it to seize the company back, oust Medley, dilute Mondavi to zero, and liquidate through offshore nominees. MW Medical was the bridge: the CIK 0001059577 reporting history travelled intact from the Dynamic spin-off, through the Chapter 11 strip, into the Davi Skin offshore liquidation.61 See the Davi Skin scheme →

  1. SEC Form 8-K, Davi Skin, Inc. (Aug. 16, 2004); Complaint, Medley v. Wallace, No. BC351142 (L.A. Super. Ct. Apr. 21, 2006); Forensic research brief — MW Med., Inc. (CIK 0001059577): Medicare veneer, Chapter 11 strip, and reconcentration.
9

Documents

The complaint that pursued Wallace into MW Medical, and the bankruptcy filings that weaponized it — the manufactured Chapter 11 and the plan of reorganization that extinguished the outside shareholders.

Burwell v. Wallace — amended complaint · 25 May 2000
Burwell v. Wallace — amended complaint 1 / —
loading page…

Burwell v. Wallace, No. CV2000-007658 (Ariz. Super. Ct.). The civil action against Wallace that the MW Medical bankruptcy was later filed to defeat.

  1. The pre-bankruptcy claim. The amended complaint pursued Wallace into MW Medical — the outside liability the later Chapter 11 was engineered to extinguish.
  2. MW Medical as the vehicle. MW Medical was the 1998 Dynamic Associates spin-off Wallace ran, with a Cane-family bloc holding the controlling equity.
  3. Sets up the weaponized bankruptcy. This claim is exactly what the manufactured ~$200K secured note and the §1145 plan were built to wipe out.
  4. Timing. Filed 25 May 2000 — about twenty months before the Chapter 11 petition.
MW Medical — Chapter 11 voluntary petition · 25 Jan 2002
MW Medical — Chapter 11 voluntary petition 1 / —
loading page…

In re MW Medical, Inc., No. 02-01090 (Bankr. D. Ariz.). The voluntary petition that put the §1145 stock-laundering machinery in motion.

  1. The manufactured filing. MW Medical files Chapter 11 on 25 Jan 2002, with Wallace positioned as the primary secured creditor.
  2. Secured-creditor priority. Wallace’s self-dealt note sits first in line, ahead of every outside shareholder.
  3. §1145 laundering. The reorganization made the new shares automatically free-trading — no registration, no legend, no holding period.
  4. Purpose: extinguish outside equity. Filed to wipe the outside shareholders rather than reorganize a business — the signature of bankruptcy fraud under 18 U.S.C. §152.
MW Fitness, Inc. — Nevada Articles of Incorporation · 31 Jul 2002
MW Fitness, Inc. — Nevada Articles of Incorporation 1 / —
loading page…

Articles of Incorporation of MW Fitness, Inc. (Nev.), transmitted 31 July 2002 from “Cane and Company.”

  1. Cane’s firm forms the shell. The registered agent is Cane O’Neill Taylor, LLC at Cane’s own Las Vegas office (2300 W. Sahara Ave., Suite 500); the filing was faxed from “Cane and Company.”
  2. Wallace is the sole director. The first board consists of one member — Jan Wallace (listed at 6929 E. Cheney) — the same operator running the MW Medical cluster.
  3. Blank-check capital. 100,000,000 shares authorized (90M common / 10M preferred, $0.001 par) — a shell created alongside the MW Medical → Davi Skin chain (one of the “MW” entities spun out of the bankruptcy).

The plan that executed the wipeout:

MW Medical — Joint Plan of Reorganization · 4 Feb 2002

10

Timeline

  1. 25 Feb 1998Dynamic Associates files an 8-K spinning out MW Medical, Inc. (CIK 0001059577) via a 1:1 distribution mirroring the register; Wallace President/CEO/Director; ~48% to Michael (later Kyleen) Cane.
  2. 1999–2002Genesis Health Management — up to 26 geropsychiatric hospital contracts across four states, 100% Medicare-billed — supplies a $49.3M revenue veneer over a structurally blank-check shell.
  3. 29 Nov 2001Receiver 8-K issued for MW Medical, opening the bankruptcy sequence.
  4. 22 Jan 2002MW Medical reports its Chapter 11 filing (Form 8-K, Acc. 0001075793-02-000009).
  5. 25 Jan 2002Voluntary Chapter 11 petition (Form 1) filed — In re MW Medical, Inc., No. 2:02-bk-01090-RTB (Bankr. D. Ariz.).
  6. 4 Feb 2002Joint Plan of Reorganization filed; the plan converts the insider note and extinguishes outside equity.
  7. FY 200210-KSB: $375,000 of the note converted to 74,000,000 shares at $0.005; remaining convertible balance $570,775.30.
  8. 15 Mar 2003MW Medical 8-K documents the Wallace/Sim promissory notes and the $615,871 secured-creditor position.
  9. 2004Reorganized shell emerges via a 1-for-500 reverse split, is sold to Parrish Medley, and renamed Davi Skin, Inc. — feeding the Davi Skin offshore liquidation.
11

Named parties

  • Jan Wallace (President/CEO/Director; sole secured creditor; $615,871 note position)
  • Kyleen (“Michael A.”) Cane (~48% holder; counsel; EDGAR filer)
  • Grace Sim (co-note holder; manufactured records)
  • Parrish Medley (buyer of the reorganized shell; later ousted at Davi Skin)
  • Entities: Dynamic Associates / LATI (CIK 0000878146) · MW Medical, Inc. (CIK 0001059577) · Genesis Health Management · Davi Skin, Inc.
12

Citations & pleadings

  • Dynamic Assocs., Inc., Current Report (Form 8-K) (Feb. 25, 1998) (MW Medical spin-off; CIK 0001059577)
  • Dynamic Assocs. / LATI Annual Reports (Form 10-KSB) (FY1999; FY ended Apr. 30, 2002) (Genesis / $49.3M Medicare veneer)
  • MW Med., Inc., Current Report (Form 8-K) (Mar. 15, 2003) ($615,871 secured position)
  • Voluntary Petition & Joint Plan of Reorganization, In re MW Med., Inc., No. 2:02-bk-01090-RTB (Bankr. D. Ariz. Jan.–Feb. 2002)
  • MW Med., Inc., Annual Report (Form 10-KSB) (FY ended Dec. 31, 2002) ($375,000 → 74,000,000 shares at $0.005)
  • Statutes: 15 U.S.C. §78m(d) · 11 U.S.C. §1129 · 18 U.S.C. §§152, 1962(c)