DAVID PATCH WIPES BIOPURE EGG OFF FACE IN LATEST SEC CHARGES.
ONLY IN AMERICA.....
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"Finally, we will come to BIOPURE (NASDAQ: BPUR). This Cambridge Ma. based company has struggled recently to survive. The NASDAQ is threatening to de-list the security due to their inability to meet minimum pricing requirements of $1.00/share. BIOPURE has slipped in their FDA approval timeline and thus their financials are behind as well. Recently they entered into a financing agreement with Institutions and Private Investors that required significant stock dilution to raise Capital based on the low share values. BIOPURE is also reportedly on the “threshold list” circulating amongst Wall Street. The settlement problems they are encountering have resulted in possible de-listing and with the recent financing arrangement, excessive dilution to their stock and their investors. But the NASDAQ, who can’t enforce settlements, still considers de-listing. Only in America!"
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U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19376 / September 14, 2005
SECURITIES AND EXCHANGE COMMISSION v. BIOPURE CORPORATION, THOMAS MOORE, HOWARD RICHMAN AND JANE KOBER, (United States District Court for the District of Massachusetts, Civil Action No. 05-11853-WGY)
SEC CHARGES MASSACHUSETTS BIOTECHNOLOGY COMPANY AND EXECUTIVES WITH SECURITIES FRAUD
The Commission today filed a civil fraud action against Biopure Corporation of Cambridge, Massachusetts and three top executives for misleading public statements about the company's efforts to obtain FDA approval for its primary product, a synthetic blood product, while at the same time Biopure was raising millions of dollars from investors. The action, filed in federal district court in Massachusetts, charges Biopure, its former CEO Thomas Moore, 54, of Boston, former Senior Vice President of Regulatory Affairs and Operations Howard Richman, 53, of Houston, Texas, and current General Counsel Jane Kober, 62, of Bellport, New York, with violating or aiding and abetting violations of the antifraud and reporting provisions of the federal securities laws in connection with materially misleading statements between April and December, 2003.
The Commission's Complaint alleges that, beginning in April 2003, Biopure received negative information from the FDA regarding its efforts to obtain FDA approval of its synthetic blood product Hemopure but failed to disclose the information, or falsely described it as positive developments. Specifically, the Complaint alleges that in April 2003, the FDA placed a clinical hold barring Biopure from conducting clinical trials of Hemopure in trauma settings such as emergency rooms, because of safety concerns about Hemopure. As alleged, during the next eight months, the company concealed the imposition of the clinical hold while making public statements about its plans to obtain approval for trauma uses of Hemopure. In addition, according to the Complaint, in July 2003 the FDA informed Biopure that it had not approved Biopure's application for use of Hemopure in orthopedic surgery, and instead conveyed serious concerns about whether the materials Biopure had submitted in support of its application were reliable and questioning the safety of Hemopure. Biopure, however, issued public statements beginning on August 1, 2003 describing the FDA's communication as good news, causing its stock price to increase by over 20%. The Complaint alleges that Biopure continued to make misleading statements until December 2003. During this period, Biopure raised over $35 million from investors. The Complaint further alleges that as the true status of Biopure's efforts to obtain FDA approval gradually became public, through a series of incomplete and misleading disclosures between late October and the end of December 2003, the company's stock price plummeted almost 66% from its August 1 price.
According to the Complaint, Moore, the former CEO, personally made and approved misleading statements; Richman, the former officer responsible for FDA relations, made and provided information for misleading statements; and Kober, who continues to serve as Biopure's General Counsel, drafted and approved misleading statements. The Commission's Complaint charges Biopure and the three individual defendants with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder and with directly or indirectly violating Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder, and charges Moore with violating Rule 13a-14 thereunder. The Commission is seeking injunctive relief, civil penalties, and an order barring Moore, Richman and Kober from serving as officers or directors of any public company.
SEC Complaint in this matter
sec.gov
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Home | Previous Page Modified: 09/14/2005
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Elgindy Trial Illustrates Incompetence at the Federal Levels. January 4, 2005
David Patch
The testimony of former Federal Bureau of Investigations Agent Jeffrey Royer at the Anthony Elgindy stock manipulation trial in NY raises serious doubts about the win at any cost approach to Federal Agency efforts.
Under testimony Royer, on trial for securities fraud himself, claimed that he was operating under a typical agent-informant relationship when he proceeded to hand accused stock manipulator Anthony Elgindy confidential information on SEC and FBI Investigations into potential “Scam companies”. Elgindy would then take this confidential information and launch a merciless barrage of short sellers and damaging reports on these firms attempting to bring down their operations. In the wake was left untold numbers of innocent investors. Elgindy and his clan made money.
According to a Dow Jones article by Carol Remond, Royer told jurors that his desire to quash securities fraud was fueled by his own losses in a company called Webtel. Royer said he invested about $82,000 of his own and his friends' and family's money, which was lost when the company blew up.
Apparently the fact that Royer lost money in a scam stock left him compelled to include others in his suffering as he fed Elgindy this inside information to be used for stock manipulation.
The problem with this fiasco that has found its way into the US District Court in NY is that Royer and Elgindy did not operate alone in this. It was an entire network of co-conspirators that allowed the stock manipulation to transpire and those co-conspirators include Wall Street and Wall Streets illustrious regulators.
Anthony Elgindy, and former FBI Agents Jeffrey Royer and Derrick Cleveland are accused of, among other things, stock manipulation as well as insider trading. To commit a stock manipulation strategy in short selling, the short sales must go beyond the natural short sale processes; borrow a security for settlement delivery. Had Elgindy operated in that legal manner there would be no trial. Instead, in this case the sales became naked shorts as the magnitude of short sales could not meet the guidelines for trade settlements. The short sales were overwhelming and went beyond shares available to borrow. To manipulate a stock you must have access to sell any required amount necessary to do the job and Elgindy and his team were given that access.
Anthony Elgindy ran his web site that, through paid subscriptions, allowed many savvy short selling enthusiasts to a smorgasbord of juicy details about events to come. The subscribers included a reported 400 or more Hedge Funds along with other short selling professionals.
As FBI Agent Royer, and reportedly other SEC and NASD officials provided Elgindy with investigations underway, Elgindy would use his internet site to pass on such information initiating attacks on these companies. These were fraud companies and the regulators could not be bothered with their own policing.
The attacks orchestrated came by way of massive short selling that resulted in overselling of these securities and resultant stock price declines. Under the pressure of these short sales Wall Street firms and the Depository Trust and Clearing Corporation (DTCC) could not maintain trade settlements on the volumes being sold in these securities resulting in massive settlement failures.
Wall Street, by continuing to accept the trading from these Hedge Funds and short selling enthusiasts assisted in the stock manipulation and did so for the very revenues that came from the trade business.
So then, where were the Regulators to step in and take control over the matter?
Like Mr. Royer, the SEC and NASD were so narrowed in on shutting down these companies they too were willing to allow innocent investors to fall victim as Mr. Royer once had. Under Testimony Royer, referring to his providing confidential information to Elgindy claimed "It needed to be done. There was no limit to how much (Elgindy and other members of his investing Web site) could help," Royer said. Royer followed up by stating “that it is standard procedure for FBI agents working with undercover informants.” But what about the Investors?
To put things in perspective today, during this time of such an explosive trial, let’s see how things have changed.
The SEC recently released Short selling Regulation SHO. With this regulation comes a ‘threshold list” of securities with abusive settlement failures due to an oversold market for extended periods of time. The present list of companies that fall under this category is greater than 1000 and represent over 12% of all securities. Soon we will know exactly who is on this list although the regulators have already provided this confidential information to WALL STREET.
Before the regulators initiate fair market practices, let’s look at a couple recent high fliers that question our lessons learned.
Allied Capital Corporation (NYSE: ALD), has been under fire by short sellers over the manner in which they have priced securities in public offerings. These short sellers have complained to the SEC over their practices and the informal investigation yielded little. The short sellers then went on the road to the US attorney who has now opened up their own investigation into the actions of ALD. The recent news of this investigation yielded a precipitous drop in ALD’s stock price. As for ALD, they have been listed on the preliminary “threshold security” published by the NYSE for their problem stocks. The stock is oversold in short sales and the recent US Attorney action fed right into their hands.
Horizon Offshore Inc. This is a more interesting tale. Horizon is a NASDAQ listed security with slightly more than 27 Million shares outstanding. Prior to last Thursday December 30, 2004 the average daily trading volume in Horizon was maybe 1 million shares. Starting last Thursday the stock traded 33 Million, 65 Million, and 50 Million shares consecutively over the past 3 trading days. Nearly 6-times the total number of shares issued by the company had been traded. Today, January 3, 2005, the stock had a pre-market volume of over 2 million shares and opened up at $2.00/share, up 21%. After trading another 48 Million shares throughout the day, the stock closed the day at $2.01. Most of the trading took place between a window of $1.97 and $2.04. So how does stock trade 2-times outstanding and not move? Do we really think these trades will all settle? Count on Horizon being listed as a threshold security on January 10, 2005.
Finally, we will come to BIOPURE (NASDAQ: BPUR). This Cambridge Ma. based company has struggled recently to survive. The NASDAQ is threatening to de-list the security due to their inability to meet minimum pricing requirements of $1.00/share. BIOPURE has slipped in their FDA approval timeline and thus their financials are behind as well. Recently they entered into a financing agreement with Institutions and Private Investors that required significant stock dilution to raise Capital based on the low share values. BIOPURE is also reportedly on the “threshold list” circulating amongst Wall Street. The settlement problems they are encountering have resulted in possible de-listing and with the recent financing arrangement, excessive dilution to their stock and their investors. But the NASDAQ, who can’t enforce settlements, still considers de-listing. Only in America!
The lessons learned from spending millions of Federal dollars investigating and bringing to trial Anthony Elgindy has yielded little. In the end they will plea out Mr. Elgindy, in my opinion, for some bigger fish that will never come to fruition.
As for the SEC, they already sanctioned continued fraud when they allowed Wall Street to ignore the Securities Laws pertaining to trade settlements and grandfathered all past mistakes away when they released their new short selling regulations. They once again handed the “Confidential” information to the bad guys and said manipulate away!
In it all, it is Former FBI Agent Jeffrey Royers own words that is the most disheartening. His desire to quash securities fraud was fueled by his own losses. His method to quash the securities fraud – commit the act himself and make more suffer. Now there is a class act.
Starting January 10, 2005 look up those ‘threshold securities” and see if you too have been manipulated by a rogue system
For NYSE Securities log on to www.nyse.com/threshold and,
For NASDAQ, AMEX, and OTCBB Securities log on to nasdaqtrader.com
Happy Hunting.
Note: Anthony Elgindy and Jeffrey Royer have not been convicted of any crimes at the time of this writing. This reporting is based on court proceedings and testimony.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2004
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