Spencer Pharmaceutical (SPPH)

[scion]

REQUEST FOR INTERNATIONAL JUDICIAL ASSISTANCE (LETTER ROGATORY)

The United States District Court for the District of Massachusetts presents its compliments to the Nova Scotia Supreme Court in the Province of Nova Scotia, Canada, and requests judicial assistance to compel the attendance of a witness at an oral deposition in Nova Scotia and the production of documents to be used in a civil proceeding before this Court in the above-captioned matter. This Court requests the assistance described herein as necessary in the interests of justice and d irects this request to the appropriate Judicial Authority in the Province of Nova Scotia, Canada.

I. Summary of Action

The United States Securities and Exchange Commission (the "SEC" or "Commission") filed this action on December 17, 2012, in the United States District Court for the District of Massachusetts against: Spencer Pharmaceutical Inc. ("Spencer"), a Delaware corporation; current and/or former Canadian residents Jean-Fram;;ois Amyot, Maximil ien Arella, and Ian Morrice; and Canad ian companies JAB Med ia Inc. ("JAB"), and Hilbroy Advisory Inc. ("Hilbroy"). In its Complaint, the SEC alleges that the defendants violated the anti-fraud provisions of the federal securities laws by orchestrating a "pump-and-dump" scheme involving the shares of Spencer, a penny stock traded on the United States' domestic over-the-counter securities market. The SEC also alleges that defendants Amyot, Arella, and Spencer violated the registration provisions of the federal securities laws by engaging in the sale of unregistered securities in Spencer.

The SEC alleges that Amyot led a scheme perpetrated by the defendants to falsely promote Spencer's business activities and a fake buyout offer in order to benefit from selling Spencer's shares at inflated prices. Amyot initiated the scheme by orchestrating a reverse merger to create Spencer in 2009. While Spencer claimed it was a "US-based pharmaceutical company" based in Boston, Massachusetts, its Boston office was nothing more than a virtual office and its officers - Amyot, and then later, Arella and Morrice - were located in Canada.

Spencer issued millions of shares in November 2009, of which at least 69 million went to entities and funds Amyot controlled.

The SEC alleges that, after creating Spencer, which had large debts and no revenue or legitimate assets, the defendants began a two-stage promotional scheme in 2010. First, between March and November 2010, the defendants misled investors about Spencer's business activities and purported patent portfolio through a false and misleading disclosure statement and false and misleading press releases, as well as through related promotional materials distributed by JAB and third parties paid by Hilbroy. Then, in early November 2010, the defendants' scheme began a new, more aggressive phase when Spencer announced that it had received an unsolicited $245 million buyout offer from a purported Kuwaiti company called Al-Dora Holdings. Spencer proceeded to issue nearly twenty press releases concerning the offer's progression, leading the public to believe that the extraordinary buyout would be complete in March 2011. But then, two days before the purported closing date, Spencer abruptly announced that it had secured a "mutual extension agreement" with Al-Dora and its purported subsidiary, Hail First Pharma ("Hail First"), so that Spencer could finalize certain scientific studies. Spencer next announced, in September, that negotiations had ceased.


The SEC alleges that, in truth, the transaction never took place because the offer was nothing more than a fiction created to pump up Spencer's stock price. The offer was concocted by Amyot, and each of the defendants knew, or were reckless in not knowing, that it was not real. Amyot orchestrated all aspects of the offer, including the steps taken by Al-Dora and Hail First, and Arella and Morrice never confirmed that Al-Dora was a legitimate company, despite telling the market that due diligence was being conducted and that the offer was real. Based on their false and misleading promotional efforts, Amyot profited handsomely when he dumped approximately 36 million shares of Spencer for gross proceeds in excess of $5.8 million through two funds he controlled. Amyot was able to have so many shares available to him in part because, at an earlier date, he had orchestrated the illegal sale of 12 million purported ly unrestricted Spencer shares to a company for w hich he was the sole d irector, then through another company he controlled, and then eventually into one of the funds he controlled.

Based on this conduct alleged in its Complaint, the SEC claims that (1) all the defendants engaged in: (a) fraud in the offer or sale of securities, in violation of Sections l 7(a)(l ) and (3) of the Securities Act of 1933 ("Securities Act"), and (b) fraudulent or deceptive conduct in connection with the purchase or sale of securities, in violation of Section I O(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules I Ob-5(a) and (c) thereunder; (2) Spencer, Amyot, Arella, and Morrice engaged in: (a) fraud in the offer or sale of securities, in violation of Section l 7(a)(2) of the Securities Act, and (b) fraudulent or deceptive conduct in connection with the purchase or sale of securities, in violation of Section I O(b) of the Exchange Act and Rule 10b-5(b) thereunder; (3) Arella, Morrice, IAB Media, and Hilbroy aided and abetted Spencer's violations of Section 17(a) of the Securities Act, Section I O(b) of the Exchange Act, and Rule I Ob-5; (4) Amyot had control person liability for Spencer's violations of Section I O(b) of the Exchange Act, and Rule I Ob-5; and (5) Spencer, Amyot, and Arella engaged in the sale of unregistered securities in violation of Sections 5(a) and 5(c) of the Securities Act. The SEC's
Complaint seeks permanent injunctions, disgorgement, prejudgment interest, and civil monetary penalties against all defendants, as wel l as officer and director bars and penny stock bars against Amyot, Arella, and Morrice.

Defendants Amyot, Arella, Morrice, Hilbroy, and JAB Media have filed Answers in which they have denied the majority of the allegations in the Commission's Complaint and have denied any wrongdoing or violations of law. Defendant Spencer has failed to respond to the Complaint. Ultimately at issue in the case is whether the Commission can establish its allegations of improper conduct by the defendants under the securities laws.

The Commission brought this action pursuant to the enforcement authority conferred upon it by Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)] and Section 21(d) of the Exchange Act [15 U.S.C. §§ 78u(d)]. This Court has jurisdiction over this action pursuant to Sections 20(d) and 22(a) of the Securities Act [15 U.S.C. §§ 77t(d), 77v(a)] and Sections 21(d), 21(e), and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), 78aa].

II. Assistance Required

A substantial amount of the conduct giving rise to the allegations in the Complaint took place in Canada, and one of the important witnesses resides in the Province of Nova Scotia.

During the relevant time period, defendants Amyot, Arella, JAB, and Hilbroy were each located in the Province of Quebec, and Mr. Morrice resided in the Province of Ontario. Similarly, one of the witnesses with knowledge of facts relevant to this action, specifically Hussain Al-Awaid, resides in Bedford, Nova Scotia. Mr. Al-Awaid is identified in the defendants' Initial Disclosures as an individual who may have discoverable information that the defendants may use to support their defenses. Based on its own information and based on the defendants' initial disclosures, the SEC believes that Mr. Al-Awaid has key information concerning the defendants' pump-and-dump scheme. Mr. Al-Awaid was identified in Spencer's press releases as the CEO of Al-Dora, the company that purported ly offered to acquire Spencer.

This Court has jurisdiction under the Federal Rules of Civil Procedure to order discovery, including depositions of witnesses upon oral examination and production of documents from any person regarding any matter which is relevant to the subject matter of the pending action.

The testimony and documents the SEC is seeking from the aforementioned witness who resides in Nova Scotia are not only relevant to discovery, but are also necessary for the trial of this case and are not otherwise obtainable by this Court at trial through this Court's compulsory process. Thus, the evidence so obtained will be used by the parties at the trial itself. The evidence sought in Nova Scotia by this Request is necessary in order for this Court to do justice in this case. Therefore, this Court respectfully requests that, in the interest of justice, you issue appropriate orders, subpoenas, or other compulsory process necessary to compel the attendance of the witness listed below for oral deposition and for the production of documents described below concerning any matter relevant to this case.

This Court further requests that the proper judicial authorities of Nova Scotia cause the depositions to be recorded in writing by a qualified court reporter, to cause the recordi ngs of the depositions to be authenticated, to allow the depositions to be videotaped, and to cause the authenticated records to be delivered to Plaintiff s and Defendants' counsel. It is hereby requested that Plaintiff s representatives be granted the option to have the testimony videotaped by a qualified videographer. The original transcripts of the testimony, and if the testimony is videotaped, the videotapes, should be returned to Plaintiff s representatives for retention and production at the time of trial.

Pursuant to 28 U.S.C. § 1 782, this Court stands ready to extend similar assistance to the Courts of the Province of Nova Scotia in like cases.



OCR extract
Doc 66 PDF file
http://www.scribd.com/doc/216353696/SEC-v-Spencer-Pharmaceutical-Inc-Et-Al-Doc-66-Filed-07-Mar-14