OT (Any merit?): Biovail sues U.S. hedge fund for shorting scheme
2006-02-22 21:08 ET - Street Wire
by Stockwatch Business Reporter
Biovail Corp. has filed a $4.6-billion market manipulation lawsuit against a U.S. hedge fund, claiming the company was the victim of a massive short-selling scheme. In a civil suit filed in New Jersey on Wednesday, the company says hedge fund SAC Capital reaped "enormous profits" while co-ordinating attacks on the stock. (All figures are in U.S. dollars.)
The 87-page suit lists a series of companies connected to SAC Capital as defendants as well as SAC's founder, billionaire Steven Cohen. Mr. Cohen, 47, is reportedly one of the most powerful traders on Wall Street.
Biovail claims SAC hired two Arizona research firms to punish its share price in 2003 and 2004 with biased reports. The suit identifies the companies as Camelback Research Alliance Inc. and Gradient Analytics Inc.
In a June, 2003, "hatchet job" prepared by Camelback, "SAC Capital provided virtually all of the information and opinions found in the report which grossly distorted and misstated the facts concerning Biovail's business and accounting," the suit says.
Biovail, which traded at $67.75 in June, 2003, fell to $21.90 by October of that year. The stock has traded between $20 and $30 since.
"SAC Capital instructed Camelback to hold the report for over a week so that SAC Capital and other defendants could establish short positions in Biovail stock," the lawsuit reads.
Biovail also claims people working with SAC paid doctors to tell reporters Biovail was bribing them to prescribe its products.
"Similar orchestrated attacks continued during the spring of 2004 by which time Biovail's stock had been driven down over 50%, its business reputation devastated, its ability to access capital markets severely impaired, and hundreds of its employees (including in New Jersey) laid off," the company claims.
Biovail says it was not the only victim of SAC Capital's alleged shorting scheme. It says SAC Capital targeted at least a dozen other companies.
Biovail's allegations have not been proven in court and Mr. Cohen and the other co-defendants have not had a chance to answer the complaint.
"Stevie" Cohen
Mr. Cohen, known as "Stevie" to industry insiders, is regarded as one of the most powerful traders on Wall Street. In July, 2003, Business Week called him a market genius. His hedge funds, which regularly return about 40 per cent, reportedly account for as much as 3 per cent of the daily volume on the New York Stock Exchange. Mr. Cohen, a real broker's buddy, spends about $150-million a year on commissions.
According to Forbes Mr. Cohen is the 244th richest person in the world. He apparently made an $8,000 profit on his first day in the business, when he started working at Gruntal & Co. in 1978.
The OSC investigated Biovail
Biovail, which was halted Wednesday, has been buffeted more recently by patent disputes and investigations into the company's accounting practices. The Ontario Securities Commission reported last November it was looking at trades by the company's chairman, Eugene Melnyk. The OSC, which has also looked into revenue recognition practices at the company, has not made any allegations against Biovail or Mr. Melnyk.
Before it was halted, Biovail gained 69 cents Wednesday, closing at $29.44. |
