Ex-Bico chief gets detention for fraud
By Thomas Olson
TRIBUNE-REVIEW
Saturday, May 24, 2003
Former Biocontrol Technology Inc. CEO Fred Cooper, whose company raised millions in stock sales but failed to develop a device to monitor diabetics' blood sugar, was sentenced Friday to at least six months of home detention for securities fraud and tax evasion and will wear a device to monitor his whereabouts.
Senior U.S. District Judge William L. Standish in Pittsburgh sentenced Cooper to six to 12 months of detention in his home and three years' probation.
Cooper, of Nevillewood, Collier Township, was not fined for the criminal charges to which he plead guilty last September. Under sentencing guidelines, he could have received up to 10 years in prison and $1 million in fines for fraud, and up to three years and $250,000 in fines for filing false tax returns.
Renamed Bico a couple of years ago, the company never made a profit and declared bankruptcy on March 18. While headquartered in Pittsburgh, Bico's closed manufacturing facility is in Indiana County.
Standish gave Cooper the lighter sentence because "his community and charitable activity is truly exceptional," the judge said.
Six witnesses testified in Cooper's defense, including his son and former Pittsburgh Steelers player Mel Blount, whose home for wayward boys Cooper supported.
Cooper also had given $150,000 to an Aliquippa church to start a computer-learning program. But First Assistant U.S. Attorney Robert Cessar noted the money actually came from Bico's company coffers.
"I don't know where the money came from, only that it came from Fred," replied Bishop Melvin Clark, pastor of Church of the Round.
Cooper declined comment after yesterday's sentencing. His attorney, James Sharp, said, "We're delighted. We thought it was justice."
During Bico's nearly 17-year history, it sold waves of stock to support failed attempts to create a device to read diabetics' glucose levels without pricking their fingers for blood. Bico twice failed to obtain U.S. Food and Drug Administration approval to market the so-called Diasensor.
The Internal Revenue Service criminal investigation division and the U.S. Postal Inspection Service began investigating Cooper and the company in 1996. The former CEO engaged in "manipulative and deceptive devices in connection with the purchase and sale of the securities of Biocontrol," prosecutors charged.
Cooper resigned as Bico's CEO for unstated reasons on July 25. He had received warrants to purchase stock which he later exercised for a profit that he did not report to the IRS.
Since its inception, Bico had issued more than 2.45 billion shares -- more stock than is often floated by public companies hundreds of times its size. The company derived most of its revenue from selling stock, such as the roughly $6.6 million it raised from a March 2000 offering.
The case centered on Cooper's role in obtaining bank loans by pledging as collateral Bico investments without disclosing the transactions as required by the Securities and Exchange Commission.
Disgruntled shareholders brought a class-action lawsuit against Bico in 1996 for providing allegedly misleading information regarding the Diasensor and the sale of stock. The company denied the allegations and later paid a nearly $3.5 million settlement.
The securities fraud allegation stems from three loans Cooper obtained from Three Rivers Bank in 1996. The former CEO arranged for three certificates of deposit owned by Bico and totaling $623,000 to guarantee personal loans to himself and two other officers.
Cooper's failure to disclose the transactions in Bico's 1996 annual report violated SEC regulations and resulted in "a fraud and deceit upon the investing public," prosecutors charged.
Thomas Olson can be reached at tolson@tribweb.com or (412) 320-7854.
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