Onetime "King of Biotech" runs afoul of law again

Reuters News
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Posted: May 10, 2012 6:44 PM
Onetime "King of Biotech" runs afoul of law again

By Grant McCool

NEW YORK (Reuters) - David Blech, an investor who was known as the "King of Biotech" before he admitted to criminal charges of stock manipulation in 1998, has run into trouble with the law again over illegal trades in stocks of two biopharmaceutical companies.

Blech told a federal judge in New York on Wednesday that in 2007 and 2008 he bought and sold stocks of Pluristem Therapeutics Inc and Intellect Neurosciences Inc in quick succession to try and conceal his own sales that might have reduced the stock's value.

Blech, 56, of New York City, said he was so convinced that Pluristem would be a success that he borrowed much of the money he used to help his friends and family to buy the stock on the Over the Counter Bulletin Board.

"By selling my Pluristem shares as I did, and buying back into my friends' and family's accounts some of the stock I had sold, I was able to conceal from the market my real intention, while getting the money I needed to pay off some of my debts," Blech told U.S. Magistrate Judge Frank Maas in Manhattan federal court.

The companies are not accused of any wrongdoing.

The top U.S. market regulator filed civil charges against Blech, who since 1980 has been a founder of companies and a major investor in the biotechnology sector, earning the nickname "King of Biotech."

Intellect Neurosciences Chief Executive Officer Daniel Chain said Blech co-founded and advised the New York-based biopharmaceutical company.

"We had no knowledge of what was happening with the stock," Chain said. Chain said the company had been cooperative with an investigation by the U.S. Securities and Exchange Commission.

The SEC said in a statement that Blech and his wife Margaret Chassman, flouted securities laws when they repeatedly made unregistered sales and failed to disclose them in their brokerage accounts. Chassman's lawyer, Gordon Mehler of Mehler law firm, could not be reached to comment.

Blech's case with the SEC has not been resolved, his lawyer, Roland Riopelle of Sercarz & Riopelle law firm, said outside the courtroom. The lawyer said the couple has six children between the ages of 14 and 26, most of whom have health problems.

Blech, who sat hunched forward in his seat in court, said that in 2006 he invested $1.2 million in Pluristem using funds in a trust for the benefit of his autistic son. Blech said in court that he lost millions of dollars in trades.

Haifa, Israel-based Pluristem is a developer of placenta-based cell therapies. A representative of Pluristem could not immediately be reached to comment.

According to his agreement with prosecutors to plead guilty to two charges of securities fraud, Blech faces a possible prison term of between 41 months and 51 months. In 1999, he was sentenced to five years of probation after pleading guilty in 1998 to fraud charges. In 2000, he settled a related SEC case by accepting a permanent bar from associating with any broker-dealer.

The cases are USA v David Blech in U.S. District Court for the Southern District of New York No. 12-00372 and SEC v Blech in the same court No. 12-3703

(Reporting By Grant McCool; Editing by Leslie Gevirtz, Bernard Orr)