Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, August 7, 2008

Former Biopure Officer Settles Fraud Charges

The SEC announced that a final judgment by consent was entered by the United States District Court of the District of Massachusetts against Howard Richman, the former head of regulatory affairs of Biopure Corporation, in a previously-filed action alleging misleading public statements about the company's efforts to obtain FDA approval for its primary product, Hemopure, a synthetic blood product. The final judgment against Richmanpermanently enjoins him from violating the antifraud and other provisions of the federal securities laws, permanently bars him from serving as an officer or director of any public company and orders him to pay a $150,000 civil penalty.

The Commission's Complaint, filed September 14, 2005, alleges that, beginning in April 2003, Biopure received negative information from the FDA regarding its efforts to obtain FDA approval of its synthetic blood product Hemopure but failed to disclose the information, or falsely described it as positive developments. Specifically, the Complaint alleges that in April 2003, the FDA placed a clinical hold barring Biopure from conducting clinical trials of Hemopure in trauma settings such as emergency rooms, because of safety concerns about Hemopure. The Complaint further alleges that, during the next eight months, Richman and other Biopure employees concealed the imposition of the clinical hold while making public statements about Biopure's plans to obtain approval for trauma uses of Hemopure. In addition, according to the Complaint, in July 2003 the FDA informed Biopure that it had not approved Biopure's application for use of Hemopure in orthopedic surgery, and instead conveyed serious concerns about whether the materials Biopure had submitted in support of its application were reliable and questioning the safety of Hemopure. According to the Complaint, Biopure, however, issued public statements beginning on August 1, 2003 describing the FDA's communication as good news, causing its stock price to increase by over 20%. The Complaint alleges that Richman and other Biopure employees continued to make misleading statements until December 2003. During this period, Biopure raised over $35 million from investors. The Complaint further alleges that as the true status of Biopure's efforts to obtain FDA approval gradually became public, through a series of incomplete and misleading disclosures between late October and the end of December 2003, the company's stock price plummeted almost 66% from its August 1 price.

Biopure and three others previously settled SEC charges concerning the same conduct.

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