The Securities and Exchange Commission charged yesterday that Flow General Inc., a McLean-based research company, raised money without telling investors that it planned to acquire an Italian firm.
According to the SEC, Flow reached an understanding with Gelman Instrument S.P.A. two weeks before a public offering covering its acquisition by Flow. Materials filed with the SEC and sent to investors, however, spoke only in general terms of investigations of acquisitions and noted that they "have not resulted in any agreements at this time."
The SEC said that Flow actually used $8 million of the approximately $23 million raised by the offering to acquire the Italian subsidiary.
Flow, without admitting nor denying the SEC's charges, yesterday consented to a court order that requires the research company to abide by federal securities laws governing disclosure. Joseph E. Hall, president of Flow, said that the company considered the settlement "not onerous at all" and better than fighting the SEC.
"We do have our hands full," he noted. In March, a federal grand jury in Alexandria indicted officers of another Flow subsidiary, charging them with conspiracy to defraud the Army over the award of a $2.6 million computer contract in 1980.
Although Hall has said that the uncertainty resulting from those indictments may depress earnings, he said yesterday that the SEC case had no impact on operations.
The SEC said that Flow began talks with Gelman in or about early August 1980. About Sept. 15, Hall and Gelman officers initialed a "memorandum of understanding" covering the acquisition. Flow General's registration statement was declared effective about a month before announcement of the pact.