WASHINGTON (AP) — As a consequence of telling investors that a drug derived from goat blood might be approved for human use, four Pharma Executives have been accused of civil fraud by the Federal regulators.
On Tuesday, the Securities and Exchange Commission (SEC) said that the executives claimed that they were in the process of seeking US and European regulatory approval for human testing of the drug.
According to the SEC, clinical trials for this drug were blocked twice by US health authorities, and the company never submitted an application in Europe.
La Jolla, CA, based Immunosyn Corp. had only one drug called SF-1019 in the development phase. According to the SEC, from 2006 to 2010, Immunosyn claimed that the drug was potentially effective in treating ailments such as HIV, multiple sclerosis, and diabetes-related nerve damage.
In a statement, Merri Jo Gillette, Director of the SEC’s Chicago Regional Office, said that the executives routinely signed off on public filings “that told investors a story about the status of the company’s prized drug that was far different from the behind-the-scenes reality.”
On account of pocketing nearly $20 million worth of stock derived from phony claims, three executives from Immunosyn and Argyll Biotechnologies LLC, its biggest shareholder, were subjected to insider-trading charges.
The SEC said that one of the executives duped terminally ill patients at a holistic clinic in Texas by selling them shares worth $300,000. Argyll’s Chief Scientific Officer Douglas McClain Sr., who was one of the executives, claimed that 6 terminally-ill cancer patients were being treated and tested with the drug, and that 600,000 vials were ordered by the Defense Department. The SEC said that both were false claims.
The SEC added that McClain Sr. never presented the investors with the shares that they had purchased.
Besides McClain Sr., his son, Douglas McClain Jr. who is Immunosyn’s Chief Financial Officer; Immunosyn’s CEO Stephen Ferrone; and Argyll’s CEO James Miceli were amongst the others who were charged by the SEC. Ferrone was not charged with insider trading.
A comment request was not entertained by the executives’ attorney.
The defendants have been asked by the SEC to hand back any unlawful profits and pay added unspecified financial penalties. They have further been expelled from serving as officers or directors of public companies.
Immunosyn was formed by a private company, Argyll, in 2006 for the marketing, distribution, and trade of SF-1019. In exchange for explicit rights to market the drug, Argyll acquired nearly 54 percent of Immunosyn’s shares.
SF-1019 was continued to be owned by Argyll who was also responsible for seeking US and European regulatory approvals.
The first application to test SF-1019 on humans was made an Argyll scientist in December 2006. The FDA declined approval and listed 17 conditions that would have to be fulfilled before commencing trials. According to the FDA, the application failed to include key details about the drug’s chemistry and did not reveal any information regarding drug toxicity in animals.
An Argyll doctor made a second application in 2008 requesting permission to test the drug in MS patients. The trial was blocked by the FDA for the second time due to insufficient information regarding the purity and strength of the drug as well as the risk it posed to patients.
According to the lawsuit, Argyll Equities and Padmore Holdings were the other 2 companies used by the executives to sell their stock.
In November 2007, Immunosyn shares traded as high as $6.55. On Tuesday, they went for 3 cents in over-the-counter trading.