Re: 8/00 - [BXM] Massachusetts Securities Division Complaint in the matter of Costanzo, Costanzo, and Ephraim (Part 2 of 2)
C. Statements Made by Richard
Richard under various usernames has posted the following statements on the Yahoo! Finance message boards for BXM, GZSP and GZTR: (See Exhibit B for complete postings and a list of locations and dates where the same or substantially similar message was posted.)
Title: NSAIDS are vastly superior over Synvisc
Studies have proven this!
1) NSAIDS have fewer side effects than Synvisc. The safety profile of NSAIDS is vastly superior to Synvisc’s invasive and dangerous procedures. Yet NSAIDs are every bit as effective at relieving pain as Synvisc (as proven in clinical trials).
2) NSAIDs are a fraction of the cost of Synvisc. There are no proven benefits of Synvisc that justifies the additional costs.
3) NSAIDs are the time proven industry standard with decades of proven and unquestioned effectiveness and reliability.
4) Doctors face severe malpractice liability issues when administering Synvisc. Biomatrix has made it clear to doctors that if the patient suffers any sever side effects, it is the fault of the doctor and his botched administration of the injections of Synvisc. Alternatively, doctors can prescribe an NSAID regiment that will be just as effective as Synvisc while being safer for the patient and also carrying NONE of the malpractice liability issues for the doctor.
5) Synvisc can lead to FATAL ALLERGIC REACTIONS from the unremovable contaminates in Synvisc.
6) The long-term effects of Synvisc within the human body are unknown. Synvisc is absorbed into the blood stream and collects in the liver. SEVER LIVER DAMAGE could be the result! There is concern that it may be another Silicone fiasco with HUGE lawsuits against Biomatrix as a result.
7) Most patients who opt for Synvisc therapy STILL REQUIRE NSAID THERAPY in conjunction with the series of injections.
Title: Synvisc and SEVERE LIVER DAMAGE!
Synvisc contains unremovable impurities that are feared to cause SEVERE LIVER DAMAGE after prolonged exposure.
These impurities include Isopropal Alcohol (IPA), Vinyl Sulfone (what the Germans used to call "Mustard Gas" in WWI), and Formaldehyde. These toxic contaminates CANNOT be removed from Synvisc and the product is ROUTINELY shipped out to customers with levels ABOVE the failure specs set by Biomatrix. The BXM Police have PROOF that this occurs!
After injection into the knee, Synvisc is absorbed by the bloodstream and collects in the liver.
THE LONG TERM EFFECTS OF THESE TOXIC SUBSTANCES ON LIVER TISSUE IS UNKNOWN.
Biomatrix refuses to do studies to determine the long-term safety profile of Synvisc. They don’t care if you lose your liver to SYNVISC POISONING!
Title: Class action lawsuit against Biomatrix?
Now that it’s becoming clearer that Biomatrix has LIED to you when by promised you $37 for each of your BXM shares, who should you contact about SUING them?
One law firm I know about has represented disgruntled shareholders in MANY lawsuits, against companies as large as Lockheed Martin.
If I were looking to initiate a CLASS ACTION LAWSUIT against Biomatrix, I’d START by contacting them.
Here’s who to contact:
Contact Sandy A. Liebhard, Esq., or Ms. Nicole Meyer, Director of Shareholder Relations at Bernstein Liebhard & Lifshitz, LLP 10 East 40th Street, New York, New York 10016, (800) 217-1522 or 212-779-1414
Companies AREN’T allowed to STEAL YOUR MONEY!
You CAN do something!
YOU CAN FIGHT BACK!
Sue Biomatrix as a part of a CLASS ACTION LAWSUIT and get the money that Biomatrix promised you!
Fortunately, doctors are refusing to use Synvisc all by themselves because they, better than anyone else, see the dangers with Synvisc.
That’s why sales have been stalled for over a year and are now declining.
Just as CD and I predicted.
That’s why Biomatrix’s net income has dropped in the past year by an UNBELIEVABLE 85%!!!
Just as CD and I predicted (though I confess that even I didn’t think the Biomatrix collapse would be THIS FAST!).
That’s why earnings per share has dropped and UNBELIEVEABLE 86%!!!
Again just as CD and I predicted!
But if Genzyme still wants to buy Biomatrix and put an ANCHOR around the necks of their shareholders then by all means they should do so.
What do I care if Genzyme sinks to the bottom along with Biomatrix!
D. Statements Made by Ephraim
11. Ephraim under various usernames has posted the following statements on the Yahoo! Finance message boards for BXM, GZSP and GZTR: (See Exhibit C for complete postings and a list of locations and dates where the same or substantially similar message was posted.)
Title: SELL SELL SELL
BXM to be downgraded soon! Massive inventory problems! Poor Sales! No insurance coverage! Doctors find products useless!
Second Quarter sales out July 20! Abuse of employees! Possible Class action lawsuit! FDA VIOLATIONS!!!!!!!!!! MORE FDA VIOLATIONS !!!! SELL SELL SELL SELL SELL SELL SELL SELL SELL!!
Title: SEVERE FDA VIOLATIONS
Dear Investors, Medical Professionals, and Patients:
As a former employee of Biomatrix (Ridgefield, NJ) I know of severe FDA violations that originated from the Quality Control laboratory and the Quality Assurance department. Specifically from the scientific testing of raw materials and the final product (including impurity determinations) in the Quality Control Laboratory.
These violations include the following:
1) Completely fabricated testing results.
2) Out of Specification Synvisc results that were approved by the Quality Control (QC) supervisor and Quality Assurance.
3) Out of specification standards data that were approved by the QC supervisor.
These allegations are completely substantiated. Evidence exists of the above violations through current and archived log books.
More importantly, through the words of current and former Biomatrix employees.
So why mention these violations now?
Because these violations reflect Biomatrix’s current attitude toward their products. It is because of these violations that we should all question the integrity, quality and most importantly – THE SAFETY – of Synvisc and the companies complete line of Medical and Cosmetic products. With all of the uncertainty surrounding the investment potential of Biomatrix, I feel that now is a perfect time to tell my story.
Again, I am a former employee of Biomatrix WHO RESIGNED in disgust when I found that the QC supervisor and upper management ignored, and continued to ignore, these violations.
I am going to report my observations to the FDA in addition to Biomatrix’s major U.S. distribution partner, Wyeth Ayerst Laboratories.
In sum, I expect to be harassed and belittled by supporters of Biomatrix. The fact is that these violations exist! The truth hurts. Just ask the handful of current employees that continue to back my claims.
Sincerely,
A safety conscious consumer
P.S. Updates to follow
E. Attempted Manipulation of Stock Prices
12. On information and belief, the above statements made by Respondents in their message postings were made without a reasonable basis for belief. In fact, the Respondents state in their individual depositions that they did not make an effort to base their message posts on any research or facts. Moreover, the Judge in granting Plaintiff (BXM) Motion for Partial Summary Judgment on the issue of defamation found that not only did "the defendants admit to posting the various messages about the plaintiffs" but that they also admitted that "they had no reason to believe that any of the messages posted were in fact true." (Biomatrix et al. v. Costanzo et. al., Docket No.: BER-L-670-00, Jul. 25, 2000.)
13. The Respondents’ false and misleading statements have had an effect on the message board participants. One poster named Rufusley stated, " Just back, after ignoring (sic) this board for months because I couldn’t take it. Also sold all my BXM stock as well." Another named sussan69 in a post titled "I was recommended BXM" states:
I am concidering (sic) putting my tuition money into this undervalued stock. But all these negative posts seem strange? Very good source told me it will be worth 37. in a couple of months not a bad return it will help with expenses. Any advice from serious longs.
Investors who chat on the message board take anything that appears to be legitimate information very seriously. For example, in response to the Swedish medical article which was exhaustively quoted by Raymond and Richard, one investor called why2kmoose states, I am a novice investor, six months in the market, who (sic) just cheap enough to worry about my puny $1.5K GZTR investment. I did my research before entereing (sic) the market and if there is a problem with one of my stocks I want to know. So, I have literally spent hours (wasted) looking for the Journal of the Swedish Medicinal Products Agency article. I say with confidence that it doesn’t exist. Yes, I went to my local library, nothing. Asked the reference librarian for books listing all medical journals published, nothing. Called the reference librarian at my state medical university (she spent half a day looking), nothing. Looked online in the libraries for Harvard, Stanford and Yale medical schools, nothings. Searched my statewide library database, nothing. As I posted before, went to the site for the library at a leading Swedish university (Karolinska Institutet), nothing. Yes, there is a site for the Swedish Medical products Agency – nothing mentioning any journal. Recently, there was a post describing basher techniques. One was to post information that sounded like it had some truth but is impossible to verify. Well, the beauty of the internet is that we can verify that the journal and/or the article does not exist without having to visit Sweden. I don’t want to insult or resort to name calling. I just want truthful information. If there are verifiable articles that affect my $ just share information about where they can be found. I will listen to all rational discussion.
14. These statements have not only caught the attention of investors visiting the message boards, but also the media. In Heard on the Net: Harsh Rumours Dog Biomatrix , the article begins by stating "If you read what some people are saying about Biomatrix, Inc. (BXM) on stock-chat message boards, it seems like you’d be crazy to buy its stock."
15. Also an online article from www.thestreet.com stated that biotech stocks had reached a peak in March 2000, but fell in the following two months and although "many biotechs, including the Genzyme units, have recovered, Biomatrix remains depressed, trading around 23 a share with a market value of $545 million." The article highlights the fact that some of the GENZ investors are now unhappy with the merger because of BXM’s low value as compared to the $37 per share offer that GENZ originally made. The article further quoted an analyst who stated "There’s an enormous short position in Biomatrix and these guys stand to get hammered if the deal goes ahead." Even the president of GZSP acknowledged the influence that the stock bashers and the shortsellers have had by stating that "I suppose if they keep whacking away, we’d have to take another look at [the merger deal]."
16. A bulletin in Forbes also illustrates the impact of the message boards:
Joint Effort: Will holders of Genzyme Tissue Repair and Genzyme Surgical Products tracking stock reject a combined proposal to buy Biomatrix? Shortsellers sure hope so. They figure the Ridgefield, NJ-based Biomatrix, whose gel-like substance, Synvisc, is injected into knees to treat osteoarthritis, is beset with technical and accounting problems and, without the merger, is worth nowhere near its recent $19.50 price. Biomatrix officials—who have sued to stop unflattering comments posted on Web message boards staunchly defend their operation. –W.P.B.
17. In addition to statements regarding the company, products and the merger, the Respondents have also made specific statements urging investors to form a class action suit against BXM. Currently, three law firms have filed class action suits against BXM. (See Exhibit D for a sample of postings regarding forming a class action against BXM.) Class action suits may impact the price of the stock by deterring prospective investors from investing and by creating a substantial financial burden on the company.
18. The Respondents have posted false and misleading statements numerous times on the BXM, GZTR, and GZSP boards. Messages about the viability of the BXM product Synvisc, the overall financial health of the company, and the impending merger with GZSP were false and misleading. As a result, the price of BXM stock which was trading around $35 per share in April 1999 is currently trading around $21 per share.
V. COUNT
19. The Division realleges and restates the allegations and facts set forth in paragraphs 1-18.
Section 101 of the Act states that:
It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly
(1) to employ any device, scheme, or artifice to defraud,
(2) to make any untrue statement of a material fact or to omit to state a material fact necessary to in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or
(3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
19. The Respondents violated Section 101 of the Act by posting false and misleading information on the Yahoo! Finance message boards in an attempt to manipulate the price of publicly traded securities. The false and misleading statements made by the Respondents were made in an attempt to manipulate the price of publicly traded securities.
VI. STATUTORY BASIS FOR DIVISION ACTION
20. Section 407A of the Act relates to Violations, Cease and Desist Orders and Costs and it provides in pertinent part that:
(a) If the secretary determines, after notice and opportunity for a hearing, that any person has engaged in or is about to engage in any act or practice constituting a violation of any provision of this chapter or any rule or order issued thereunder, he may order such person to cease and desist from such unlawful act or practice and may take such affirmative action, including the imposition of an administrative fine, the issuance of an order for an accounting, disgorgement or rescission or any other relief as in his judgment may be necessary to carry out the purposes of [the Act].
VII. MOTION FOR TEMPORARY RELIEF
21. An ex parte temporary cease and desist order issued pursuant to §407A(b) of the Act and §10.06(c) of the Regulations is necessary in view of the following facts, which establish that any delay in issuing such an order will likely result in irreparable harm to the Massachusetts public interest:
(i) The Respondents using their various aliases continue to post false and misleading statements on the BXM, GZTR and GZSP message boards;
(ii) The Respondents unlawful manipulation of the price of BXM, GZTR and GZSP stocks is ongoing;
(iii) The likelihood that the Respondents will defraud Massachusetts residents;
(iv) The serious nature of the misconduct alleged; and
(v) The likelihood that the Enforcement Section will prevail on the merits of the Administrative Complaint.
VIII. PUBLIC INTEREST
22. For any and all of the reasons set forth above, it is in the public interest and will protect Massachusetts investors; 1) to obtain a temporary cease and desist order barring the Respondent from further violating the Act and, after hearing, to obtain a permanent cease and desist barring the same; 2) to disgorge any profits resulting from the manipulation of the stock prices 3) to impose an administrative fine on the Respondents in such amount and upon such terms and conditions as the Director or Hearing Officer may determine; and 4) to take such further action as may be deemed just and appropriate for the protection of investors.
IX. RELIEF REQUESTED
23. WHEREFORE, the Enforcement Section of the Massachusetts securities division requests that the Director or Hearing Officer of the Division enter an ORDER containing the following actions:
A. Find as fact the allegations set forth in paragraphs 1-22, inclusive, above of this Administrative Complaint;
B. Find that all of the sanctions, remedies and relief are in the public interest and necessary for the protection of Massachusetts investors;
C. Order Respondents to disgorge any profits resulting from the manipulation of the stock prices;
D. Order Respondents to pay an administrative fine to the Division in such amount and upon such terms and conditions as the Director or Hearing Officer may determine pursuant to §407A of the Act.
E. Permanently order the Respondents to cease and desist from further violations of the Act and Regulations; and
F. Take such further action as may be deemed just and appropriate.
ENFORCEMENT SECTION
MASSACHUSETTS SECURITIES DIVISION
By: ________________________________
Kimiko K. Butcher
Enforcement Attorney
Massachusetts Securities Division
One Ashburton Place, 17th Floor
Boston, Massachusetts 02108
(617) 727-3548
Dated: August ____, 2000. |
