Business Crimes Hotline

New Jersey

Employees of Drug Manufacturer Guilty of Falsifying Testing Data

A former vice president and three former supervisory chemists at a now-defunct generic drug manufacturer pled guilty to conspiracy to distribute misbranded and adulterated drugs on charges stemming from the falsification and manipulation of drug testing data, according to the U.S. Attorney for the District of New Jersey. All four defendants admitted to participating in a multi-year conspiracy to manipulate FDA-required testing and reports. The fraud included improperly changing test parameters to obtain satisfactory results. The scheme also included a secret project to gain FDA approval to manufacture a new drug by forging data in laboratory notebooks and binders. The former vice president further admitted to conspiring to commit securities fraud by trading in the company's stock while aware of the serious improprieties at the lab. (United States v. Shah, 07- 00198, D. N.J.)

New York

Securities Attorney Charged With Fraud

A securities attorney, formerly a partner with a major international law firm, has been charged with investment fraud, according to federal prosecutors. The attorney allegedly obtained unregistered, restricted securities issued in Private Investment in Public Equities ('PIPE') transactions and sold them under the false pretense that they were registered and freely tradable. PIPE securities, in this case issued as part of reverse mergers designed to take small companies public, are typically not freely tradable until after they are registered with the SEC. The securities are therefore required to bear restrictive legends until they are registered. As counsel for the issuers of the restricted stocks, the accused allegedly issued opinion letters directing that certain issued shares not bear restricted legends. In this way he is alleged to have obtained shares without the proper legends, allowing him to resell them before the issuers filed registration statements with the SEC. In so doing he reaped approximately $10 million in profits, according to the DOJ. His former law firm reported the matter to the SEC, and is cooperating with the investigation. (United States v. Zehil, 07-00305, S.D. N.Y.).

Arizona

Corporation Guilty of Defrauding USDA Meat Safety Program

An Arizona corporation and its president have pled guilty to stealing $390,000 in government funds, and to mail and wire fraud, according to federal prosecutors. The charges stem from a scheme to defraud the government's mad cow disease surveillance program. The company contracted with the USDA to collect samples from the brain stems of cattle at high risk of bovine spongiform encephalopathy, also known as mad cow disease, for testing. Instead, the company collected and submitted samples from cattle outside the targeted high risk population. The company also failed to maintain cattle carcasses and heads as required, and falsified corporate books and records to conceal the fraud. (United States v. Farabee, 07-00160, D. Az.)

New Jersey

Employees of Drug Manufacturer Guilty of Falsifying Testing Data

A former vice president and three former supervisory chemists at a now-defunct generic drug manufacturer pled guilty to conspiracy to distribute misbranded and adulterated drugs on charges stemming from the falsification and manipulation of drug testing data, according to the U.S. Attorney for the District of New Jersey. All four defendants admitted to participating in a multi-year conspiracy to manipulate FDA-required testing and reports. The fraud included improperly changing test parameters to obtain satisfactory results. The scheme also included a secret project to gain FDA approval to manufacture a new drug by forging data in laboratory notebooks and binders. The former vice president further admitted to conspiring to commit securities fraud by trading in the company's stock while aware of the serious improprieties at the lab. (United States v. Shah, 07- 00198, D. N.J.)

New York

Securities Attorney Charged With Fraud

A securities attorney, formerly a partner with a major international law firm, has been charged with investment fraud, according to federal prosecutors. The attorney allegedly obtained unregistered, restricted securities issued in Private Investment in Public Equities ('PIPE') transactions and sold them under the false pretense that they were registered and freely tradable. PIPE securities, in this case issued as part of reverse mergers designed to take small companies public, are typically not freely tradable until after they are registered with the SEC. The securities are therefore required to bear restrictive legends until they are registered. As counsel for the issuers of the restricted stocks, the accused allegedly issued opinion letters directing that certain issued shares not bear restricted legends. In this way he is alleged to have obtained shares without the proper legends, allowing him to resell them before the issuers filed registration statements with the SEC. In so doing he reaped approximately $10 million in profits, according to the DOJ. His former law firm reported the matter to the SEC, and is cooperating with the investigation. (United States v. Zehil, 07-00305, S.D. N.Y.).