Last November, Pro-Pharmaceuticals Inc. told the story of a cancer survivor as a way to promote the potential benefits of its experimental drug. Nobody was more surprised to hear that story than the patient herself.
The company's New York public relations agency, Investor Relations Group, sent an e-mail to Boston-area reporters and editors with a headline that read, "Hope is Underway for those in your Local Community Fighting Cancer."
The message read like a short newspaper story, telling how a gynecologist in Florida, Melanie Bone, suffered terribly during chemotherapy treatment for breast cancer.
The story said chemotherapy wouldn't have such side effects when Pro's experimental drug, Davanat-1, is approved. Davanat-1, according to the story, improves the effectiveness of a chemotherapy drug on mice, leaving them with "minimal" nausea, hair loss, and fatigue.
But neither Pro's agency, nor the freelancer it hired to write the piece, told Dr. Bone her story would be used to promote Pro-Pharmaceuticals.
When the freelancer interviewed her for the story, Dr. Bone believed it was for a publication, not a press release promoting a company's research. Dr. Bone had never heard of Pro-Pharmaceuticals until contacted by a Globe reporter.
"I never had any clue that was what this was going to be used for," Dr. Bone said.
A month later, Pro issued a press release, again using Dr. Bone's story, to trumpet the progress of Davanat-1.
Dian Griesel, founder and president of Investor Relations Group, defended her efforts to generate publicity for Pro-Pharmaceuticals. "I don't think there's exploiting going on here," she said. Her company no longer represents Pro-Pharmaceuticals, she added.
Pro-Pharmaceuticals executives did not respond last week to questions regarding its public relations strategy. <<
>> Ex-biotech officer wins whistle-blow firing case
Decision marks 1st Sarbanes-Oxley Act ruling in Boston area
By Jeffrey Krasner March 26, 2005
A whistle-blower who objected to questionable financing activities at Pro-Pharmaceuticals Inc. of Newton was fired for trying to abide by securities regulations, according to a judge's ruling.
Sheila Jayaraj, who served as vice president of investor relations for the biotech start-up for about six months in 2002 and 2003, was terminated after she questioned the qualifications of a stock promoter chosen by the company's chief executive to find buyers for the company's shares.
The decision by Administrative Law Judge Colleen A. Geraghty is the first in the Boston area under the whistle-blower protection provisions of the Sarbanes-Oxley Act of 2002. That act, which established tougher standards for corporate governance and financial reporting, also made it illegal for a company to fire an employee for complying with the new rules.
''This should send a message to managers in Massachusetts public companies to listen to employees who report violations of securities laws," said Jody L. Newman, an attorney at Dwyer & Collora LLP in Boston who represented Jayaraj. ''Do not dismiss what they say or dismiss the employees themselves just because you don't want to hear it."
A Pro-Pharmaceuticals spokesman declined to comment on the ruling but confirmed the company had paid lawyers' fees for Jayaraj, as ordered by the judge. The company was also ordered to erase any mention of Jayaraj's termination from its records and to tell prospective employers that Jayaraj performed her job well.
''This victory is overwhelming, and I feel vindicated," said Jayaraj. ''I believed in myself and in my faith and did the right things. I refused to participate in activities that I believed violated securities laws and the court ruled I was right."
In her ruling, the judge concluded that David Platt, the company's chief executive, fired Jayaraj because ''he grew tired" of her continued objections to using an unqualified stock promoter.
Jayaraj, a Needham resident, joined Pro-Pharmaceuticals in October 2002, and was put in charge of fund-raising. The company was a small start-up that had only recently moved from Platt's garage. The firm is trying to develop improved versions of standard chemotherapy treatments for cancer by adding a proprietary molecule. Pro-Pharmaceuticals was attempting to raise money by selling shares directly to qualified individual investors in what is called a private placement.
According to the judge's ruling, Platt told Jayaraj to hire George M. Mottel to assist in marketing the stock. Jayaraj learned that Mottel, a California resident, was not a registered broker-dealer, and she raised concerns with Platt that he might be selling stock without qualifications. Despite her warnings, Platt continued to work with Mottel, the ruling states.
A Globe investigation last year found that besides his lack of qualifications to deal in securities, Mottel had also served prison time after a 1992 felony conviction on mail and wire fraud charges for his role in a precious metals scam in California. Mottel could not be reached to comment.
In March 2003, Jayaraj expressed concern about meeting with potential investors referred by Mottel. Shortly afterward, she was fired. The termination letter said Jayaraj objected to Platt's business strategy and was unwilling to work with people he asked her to work with.
In her ruling, the judge threw out much of the testimony by Platt, the chief executive. ''In general I do not find Dr. Platt to be a credible witness," she wrote. ''I find his testimony on several issues inconsistent, equivocal, suspect or contradicted by other documentary evidence." In particular, the judge said, Platt ''was less than forthright" when discussing Pro-Pharmaceuticals' financial condition during Jayaraj's tenure. Jayaraj testified Platt told her that raising money through the stock offerings was crucial to the survival of the company. But Platt, in his sworn testimony, testified that it was ''no problem" if the company ran out of funds, according to the ruling. The judge wrote that Platt's credibility was ''undermined by his testimony on the important question of the financial well-being of the company." A separate civil suit that Jayaraj filed against Pro-Pharmaceuticals in state court was dropped after the judge's favorable ruling. <<
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