Re: 8/21/00 - [BXM] Complaint charges three men targeted companies through Internet
Complaint charges three men targeted companies through Internet
By Steve LeBlanc, Associated Press, 08/21/2000
BOSTON -- Three men targeted the stock of a biotechnology company by posting tens of thousands of false and misleading statements on an online message board, the Secretary of State's Office charged in a complaint filed Monday.
The men allegedly began posting messages last year in an effort to drive down the stock of Biomatrics Inc., which is in the process of being acquired by Cambridge-based Genzyme Corp.
From April to May, the company's stock fell from $35 a share to about $21. In the past 52 weeks, the stock's price has ranged from $17 to $38.50 per share. It was down about 19 cents a share on Monday, closing at $21.125 a share.
The three men -- brothers Raymond and Richard Costanzo of North Carolina, and Ephraim Morris of Arizona -- were named in a complaint filed by Massachusetts Secretary of State William Galvin with the state's Securities Division.
The three men posted the statements on message boards on the Yahoo! Web site, the complaint said.
In one of the messages, Raymond Costanzo warned investors that Biomatrics wanted to "steal your money with their endless lies, hype and false promises," according to Galvin's office.
In another, he predicted the stock prices for Biomatrics would fall and advised investors to "run for the hills from these fraudulent stocks," Galvin's office said.
The three also claimed patients were being injured and drugs developed by Biomatrics were not working, Galvin's office said.
Richard and Raymond Costanzo did not immediately return a phone call. A message left for an E. Morris was also not immediately returned.
Biomatrics had previously filed a lawsuit against the three, according to Bo Piela, a spokesman for Genzyme.
It was not immediately know if the Securities and Exchange Commission also was looking into the matter.
Genzyme is acquiring Biomatrics and merging it with two existing Genzyme subsidiaries to create Genzyme Biosurgery, a new division of the company designed to develop and market biotechnology products used for surgical procedures, Piela said. Genzyme has laboratories in Framingham.
Galvin's office is seeking an administrative fine, an immediate cease and desist order and a requirement that the three give up any profits they may have gained from the alleged stock manipulation. Fines can run up to $10,000 for each infraction.
The complaint does not say whether the men gained financially from the messages they accused of posting.
Rulings by the Securities Division, which is a unit within the Secretary of State's Office, do not carry the weight of criminal law. However, the complaint could be referred to the state Attorney General's Office if the three men are found to have violated a cease and desist order.
The complaint charged the three men not only used several user names on the message boards to post negative comments, but that they slightly altered the names of users who had been friendly to the stocks in order to create the impression that those users had changed their minds.
Since April 1999, about half of the 33,000 messages about Biomatrics came from the three men, according to the complaint.
A message left for a Biomatrics spokeswoman was not immediately returned Monday.
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