NY biotech financier gets prison for stock scheme

AP News
Posted: May 02, 2013 8:34 PM

NEW YORK (AP) — A federal judge displayed anger as she handed down a four-year prison sentence Thursday to a biotechnology financier who was once among the nation's wealthiest people.

U.S. District Judge Colleen McMahon repeatedly scolded David Blech while imposing the prison term and $1.3 million forfeiture. She called him a "serial stock manipulator" who had committed the same crime four times, including after he was granted leniency by a judge whom he promised he would never commit another crime.

When he asked for leniency again, McMahon raised her voice in response.

"I'm afraid you had all the mercy you're going to get. Now it's time for punishment," McMahon said. "No, not this time. No mercy!"

Blech, 57, who must report to prison in August, engaged in the same scheme in 2007 and 2008 as he had nearly two decades earlier. In the first instance, he cooperated with the government and received probation in 1999 rather than prison time, though the sentencing judge warned him that another offense would result in prison.

McMahon said Blech waited until his five years of probation had expired and the court had no power over him before committing crimes again.

"You waited 'til there was nobody looking over your shoulder and then you dived right back in," she said.

Blech pleaded guilty last year to two counts of securities fraud, admitting that he tried to manipulate the value of a biotech company, Pluristem Therapeutics Inc., after investing more than $1 million in it in late 2006. He said at the plea that he took his illegal actions after he was heavily in debt by May 2007 to family and others who had lent him money for the investment.

He said he did the same with money from relatives and friends when he was invested in Intellect Neurosciences Inc. between 2005 and early 2008.

Blech told McMahon that bipolar disorder and a gambling addiction had led him to crime and that he was finally making progress in an "effort to control my addictive behavior."

"I am profoundly sorry for this," he said. The judge told him that mental illness was no excuse and noted she had sent to prison plenty of drug dealers with addiction issues for doing less than Blech.

In 1992, Blech was listed on Forbes magazine's list of the 400 richest Americans, with a net worth of more than $300 million, but he turned toward crime after a large decline in the value of technology stocks in the spring of 1994 doomed his investments. His influence at the time in biotechnology securities was so great that at least a dozen stocks that his defunct company had underwritten lost nearly a quarter of their value when D. Blech and Co. abruptly closed its doors on Sept. 22, 1994, a day known on Wall Street as "Blech Thursday."

By 2001, Blech told The Seattle Times that he was already planning a comeback.

"I may have one more go at it in me," he said. "This time, I would try to do it in a more measured way, with only one or two biotech companies. I would not try to save the world."

At Thursday's sentencing, the judge noted that probation authorities said Blech now claims he has no assets and $9 million of debt.