SEC target Amyot a no-show for Boston trial
Wednesday, November 19, 2014
SEC target Jean-François Amyot failed to appear for the first day of his jury trial in Boston Monday morning.The SEC claims that he was behind the manipulation of pink sheets listing Spencer Pharmaceuticals Inc.
by Mike Caswell
QUEBEC'S JEAN-FRANCOIS Amyot was a no show at his pump and dump trial in Boston on Monday. The hearing,which includes a jury, was to begin Monday and continue for several days until the jury decided allegations that Mr. Amyot had run a $5.8-million market manipu lation. (All figures are in U.S. dollars.). Mr. Amyot was not present at the start of the day, and after waiting just 15 min utes the judge decided that he was not going to arrive. The judge then declared him to be in default, a finding that will likely result in him losing the case.
Source: Stockwatch, 19 Nov 2014, page 41
Pharma Exec Can't Duck SEC's Pump-And-Dump Suit
By Stewart Bishop
Law360, New York (November 14, 2014, 6:38 PM ET) -- The Canadian man behind Spencer Pharmaceutical Inc. must face charges from the U.S. Securities and Exchange Commission of spreading fictitious reports of a $245 million buyout to inflate stock prices, a Massachusetts federal judge said Friday, rejecting the man's bid to evade U.S. jurisdiction.
After revisiting the issue of jurisdiction ahead of a trial scheduled to begin Monday, U.S. District Judge Indira Talwani said given the SEC’s allegations that Spencer director Jean-Francois Amyot deceived investors into believing that Spencer was a U.S.-based company and considering he set up a “virtual office” in Boston, there is enough proof that Massachusetts is the proper venue to adjudicate charges that Amyot violated the Exchange Act of 1934.
Since the SEC satisfied jurisdiction under the Exchange Act, that is sufficient to establish a proper venue for other securities violations as well, Judge Talwani said in a written order.
“Accordingly, plaintiff SEC’s satisfaction of the venue provision of the Exchange Act is sufficient to establish that Massachusetts is an appropriate venue for the claims brought in this suit,” the judge said.
The agency claims the scheme was orchestrated by Amyot and Spencer directors Maximilien Arella and Ian Morrice, who allegedly began disseminating false press releases in November 2010 claiming a Mideast company had made an unsolicited bid to buy Spencer.
The trio collaborated with IAB Media Inc. and Hilbroy Advisory Inc., two public relations companies controlled by Amyot, to distribute the press releases and create a promotional campaign to drum up publicity for the alleged buyout offer, the complaint says. Spencer billed itself as a cutting-edge biotech firm but in reality had no business operations other than a research contract with a university in Montreal to develop technology related to a failed U.S. patent covering drug absorption.
As a result of the pump-and-dump campaign, the SEC says, Spencer’s stock more than doubled in the span of two days while its trading volume reached 6 million shares on Nov. 11, 2010 — a different stratosphere than the 50,000 shares Spencer was averaging in the three months prior to the buyout rumors.
The SEC says Amyot collected over $5.8 million from selling 36 million Spencer shares.
Amyot, who had been represented by counsel but is now appearing pro se, argued that jurisdiction in this case was precluded by the U.S. Supreme Court’s decision in Morrison v. National Australia Bank, which barred federal securities fraud actions for securities traded on foreign exchanges. He claimed Spencer’s stock was traded on OTC-Links, which is not an exchange as defined in Morrison.
However, Judge Talwani said Amyot was misapplying Morrison because the court in that case ruled that extraterritorial application of law was related to whether the allegations the plaintiff makes entitles it to relief, not whether the court had the power to hear the case.
Amyot and the SEC could not be reached for comment Friday.
Arella and Morrice settled with the SEC in September, agreeing to pay $50,000 each in penalties, and to five-year bans from serving as officers and directors of public companies.
Amyot, Morrice and several other associates are also facing charges from Quebec financial regulator Autorite des marches financier over alleged market manipulation involving Spencer and multiple other companies.
The SEC is represented in-house by Rua M. Kelly and James R. Drabick.
Amyot is appearing pro se.
The case is U.S. Securities and Exchange Commission v. Spencer Pharmaceutical Inc. et al., case number 1:12-cv-12334, in the U.S. District Court for the District of Massachusetts.
--Editing by Edrienne Su.
SPPH crooks charged with securities fraud by the SEC:
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22574 / December 17, 2012
Securities and Exchange Commission v. Spencer Pharmaceutical Inc., Jean-François Amyot, Maximilien Arella, Ian Morrice, IAB Media Inc., and Hilbroy Advisory Inc., Civil Action No. 1:12-cv-12334 (D. Mass.)
SEC Charges Company based in Massachusetts and Canada and Other Parties in Stock Pump-and-Dump Scheme Involving Fictitious Buyout Offer
The Securities and Exchange Commission filed an enforcement action on December 17, 2012, in federal court in Boston charging Spencer Pharmaceutical Inc., its officers, and several other parties for their roles in a "pump-and-dump" scheme involving Spencer's stock. The Commission's complaint alleges that Jean-François Amyot, a Canadian resident who controlled Spencer, orchestrated the scheme and worked with Maximilien Arella and Ian Morrice, Spencer's officers and directors, as well as IAB Media Inc. and Hilbroy Advisory Inc., two other companies controlled by Amyot, to create and disseminate false press releases, including press releases about a fictitious buyout offer for Spencer, and to otherwise promote Spencer's stock. The Commission alleges that the promotional campaign pumped up the price of Spencer's stock, and Amyot benefited by dumping his own Spencer stock at artificially inflated prices.
The Commission's complaint, filed in the U.S. District Court for the District of Massachusetts, alleges that beginning in November 2010, Spencer, a purported pharmaceutical company with addresses in Boston, Massachusetts, and Canada, disseminated false and misleading press releases claiming that it had received an unsolicited buyout offer from a Mideast company for $245 million when, in fact, the purported buyout offer was not real. The complaint further alleges that Arella and Morrice worked with Amyot to create and disseminate the fraudulent press releases. According to the complaint, while Spencer was issuing the press releases, the defendants were conducting a promotional campaign using Internet websites and newsletters to tout Spencer's stock and the bogus buyout offer, and the false press releases and promotional campaign were successful in pumping up the price of Spencer's stock. For example, after Spencer publically announced that the Mideast company proposed to pay $245 million for Spencer, the price of Spencer stock more than doubled in two days - opening at $0.25 per share on November 10, 2010 and closing at $0.60 per share on November 12 - and the daily trading volume for Spencer's stock reached almost six million shares on November 11, compared to a daily average trading volume of less than 50,000 shares during the previous three months. During the time the buyout offer was being promoted, Amyot sold approximately 36 million Spencer shares for gross proceeds of approximately $5.8 million. Each of the defendants are charged by the Commission with violating various antifraud provisions of the federal securities laws. The complaint further charges Spencer, Amyot, and Arella with violating securities registration provisions of the securities laws. According to the complaint, Amyot and Arella were involved in a series of transfers involving 12 million Spencer shares that were done to evade the securities registration requirements and move the shares into an account controlled by Amyot.
The Commission also suspended trading in Spencer securities on December 17, 2012, 34-68447. Securities of Spencer were quoted on OTC Link operated by OTC Markets Group Inc.
The Commission alleges that Spencer, Amyot, Arella, and Morrice violated Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder; that IAB Media and Hilbroy violated Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c); and that Arella, Morrice, IAB Media, and Hilbroy aided and abetted the violations by Spencer of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5. The Commission also alleges that Amyot is liable for Spencer's violations of Section 10(b) and Rule 10b-5 as the company's control person and that Spencer, Amyot, and Arella violated Sections 5(a) and 5(c) of the Securities Act. The Commission is seeking permanent injunctions, disgorgement plus prejudgment interest, and civil penalties against Spencer, Amyot, Arella, Morrice, IAB Media, and Hilbroy. It also seeks an order prohibiting Amyot, Arella, and Morrice from serving as an officer or director of a public company and from participating in the offering of a penny stock.
The Commission acknowledges the assistance of the Quebec Autorité des Marchés Financiers in this matter.
Spencer Pharmaceutical is listed on the US Pink Sheets, where it has the following warning (updated from ):
OTC Tiers - Pink Sheets Limited Indicates companies that are not able or willing to provide disclosure to the public markets - either to a regulator, an exchange or OTC Markets Group. Companies in this category do not make Current Information available via the OTC Disclosure and News Service, or if they do, the available information is older than six months.
OTC Pink No Information® includes defunct companies that have ceased operations as well as 'dark' companies with questionable management and market disclosure practices. Publicly traded companies that are not willing to provide information to investors should be treated with suspicion and their securities should be considered highly risky.
Because I have committed the awful crime of telling the truth about the scam that is Spencer Pharmaceuticals, I have received the following email from Spencer Pharma:
Max Arella Max Arellaarellam@spencerpharmaceutical.com
Find email Add to contactsTo firstname.lastname@example.org, 'Ian Morrice', 'max arella'
From: Max Arella (email@example.com)
Sent: Mon 12/13/10 10:30 AM
Cc: 'Ian Morrice' (firstname.lastname@example.org); 'max arella' (email@example.com)
We are writing further to your posts on the website Investorshub under your alias "SUNSPOTTER". Your posts are libelous and defamatory in nature and have cause tremendous damages to the company, its management and its partners. Your posts are in violations of the website rules and terms and conditions and do not provide accurate information and therefore your allegations are without basis.
We are requesting you immediately cease and desist your libelous and defamatory remarks and remove the posts that contain same, and provide the company with a written apology or we will be forced to take legal action against you.
Please acknowledge receipt of this email immediately and provide us with the coordinates of your legal counsel.
PLEASE GOVERN YOURSELF ACCORDINGLY
SPENCER PHARMACEUTICAL INC.
Per: Dr. Max Arella
I'd love to correspond with your attorneys, Dr. Arella.
Tell me who they are, and how mine can contact them, and I'm your man. I won't be replying to your email though from my own, or any other computer, for reasons I'm sure you can understand.
PS The truth is still a pretty good defense, and I think you'll find you have been neither libelled nor defamed. But I'm willing to leave that to a court to determine - but expect a counterclaim for malicious prosecution.
PPS You could use a spell checker. "Legal" letters without typos are more intimidating, I always think.
Spencer Pharmaceutical's PR from 11/9/2011 - a translation:
First off, this PR was not issued because SPPH's CEO has had a sudden inspiration to communicate more with his shareholders. It was written either because they have already had contact with SEC, such as a Wells Notice, or because their lawyers have told them to expect such contact.
Perhaps not entirely coincidentally, I have recently alerted SEC to the scienters that Dr. Arella has committed, and I suspect I'm not the only one to have done so.
Once a company knows it is the target of an SEC investigation, it will usually try to retrospectively cover its tracks by issuing a PR that "clarifies" its previous announcements, that is tries to amend its lies while not admitting that it did lie in the first place.
Here's a classic of its kind from another penny stock scam Green Energy Resources:
Secondly, the timing is significant - one minute after market closing. SPPH knows full well that this disclosure that is essentially a shell operating on behalf of a small Canadian hedge fund (of which more later) will cause a significant sell-off of its equity, so it releases the PR when no one can react immediately by unloading. Some one was selling yesterday though - I wonder who that was?
Because he was challenged, Arella admits that the Boston "address" is in fact a shell, although he tries to maintain that there may be some work being done there:
"the management does not work out of this legal address"
thus implying that some SPPH staff do work out of that office. I'll bet a dollar to a cent that nobody works out of 8 Faneuil Hall Marketplace other than, just possibly, a "receptionist" who answers the telephone on their behalf as a part-time role while doing the same thing for other shell companies.
As for the excuse that they need the US accommodation address for a US listing, why do they even need a US listing?
Both Canada and France, where they claim to have real operations, have perfectly good exchanges - perhaps the real reason is that the US Pink Sheets do not require any significant filings or disclosures, whereas the French and Canadian bourses do (again, see later). And of course, Pink Sheet shares are incredibly easy to manipulate, by, for example, pump and dump outfits.
I'm sure anybody visiting the University at Montreal will get a tour by perfectly pleasant people of some labs - lab rats (I know, because I used to be one) don't get out much, and welcome human contact. That doesn't mean that the $16,666 that each month SPPH pour lavishly (that's irony for anyone who was wondering) into R&D at that facility will transform SPPH into the Global Powerhouse that their previous PRS have implied they already are.
$50,000 per quarter is a derisory amount, particularly when you note that SPPH must be spending much more than that on banner ads on iHub alone. At the end of 2010, just about every iHub screen on every MB had a prominent banner advertising SPPH, in an obvious attempt to boost interest in buying its stock. Any company that spends more on pimping its stock than on R&D is almost always a scam.
That's doubly true when they're in default of their obligations to their other "partner", INSA:
"However, it should be noted that the partnership with INSA requires a payment of approximately $150,000 every quarter and the company has not yet provided the said payment and the partnership is on hold until such time as the payment can be made"
When discussing the Regulatory Approval Process, the PR conveniently omits to mention that previously they had claimed that commercialization of Met4 would commence in June 2011 in the US, Africa and various EU markets, and instead concentrates only on Canada, where , where it claims it will apply for a Special Access Program (SAP) from Health Canada for the fast-track approval of the MET4 product.
Incidentally, this is what a SAP actually is:
"What is the Special Access Programme?
The Special Access Programme (SAP) allows practitioners to request access to drugs that are unavailable for sale in Canada. This access is limited to patients with serious or life-threatening conditions on a compassionate or emergency basis when conventional therapies have failed, are unsuitable, or are unavailable."
In Health Canada's own words, you can see that the SAP has nothing to do with fast-track approval , in spite of Arella's claims. You can also see that there is literally no chance that yet another form of metformin will qualify in any way as providing something that any of the other modified release versions of metformin do not already offer.
What Arella wants you to believe is that Health Canada will approve a product - the combination of metformin with SPPH's super duper drug delivery technology - without that technology ever having been tested in humans. In reality because of the risk that the technology might not work in humans - it might dump an overdose, or it might not release enough active, its human pharmacokinetic and pharmacodynamic profile is completely unknown - that's simply never going to happen. Our friends north of the border may say "eh" a lot, but they're not dumb enough to allow some fly-by-night start-up company to experiment on their citizens by approving a drug which has never been near a human being.
And nor will any other regulatory agency anywhere in the world allow a product which is a combination of an established product such as metformin in an untested delivery mechanism such as SPPH's to be used without reasonably extensive human clinical studies.
Such studies will take more than a year from start to finish and will cost millions, maybe tens of millions of dollars.
Arella knows that, and he is deliberately trying to mislead you. Don't let him.
"The company is currently being funded by a small independent fund located in Canada."
You betcha. One of SPPH's loyal longs (if there actually are any real longs) needs to ask Dr. Arella if his new found love of transparency will let him divulge who this "small independent fund" actually is.
"The company has received an unsolicited all-cash offer on November 4, 2010 by a private equity fund. Although the offer is considerable, the company has opted to keep the information confidential until we receive further information from the purchasing party as well as retain an investment banking firm that can assist in said transaction. The company expects to release the information on the offer on or before November 12, 2010."
No reputable private equity company would think about buying any of the stock of a start-up outfit with negligible research, that issues false and misleading PRs, defaults on its payments to partners, pays for banner ads that cost more than their R&D, has supporters who are unable to perform any real DD to justify why this company is anything other than a pump and dump shell, with many of those supporters disclosing that they are paid to promote SPPH.
The so-called buyout was postponed until the end of Q2. And then it was called off for good.That kind of "bait and switch" is classic penny stock scam fare.