Carl Rausch
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19651 / April 11, 2006
SEC v. Carl Rausch, Civil Action No. 06-10642-PBS (D. MA)
SEC Files Settled Civil Injunctive Action Against Former Biopure Corporation Executive and Board Member
The Commission today filed a civil injunctive action against Carl Rausch, former Vice Chairman of the Board of Directors and Senior Technology Officer of Biopure Corporation of Cambridge, Massachusetts, for his role in Biopure's misleading public statements about the company's efforts to obtain FDA approval for its primary product, a synthetic blood product. The action, filed in federal district court in Massachusetts, charges Rausch, 57, of Belmont, Massachusetts, with aiding and abetting violations of the reporting provisions of the federal securities laws in connection with materially misleading statements by Biopure between April and December, 2003. Without admitting or denying the Commission's allegations, Rausch consented to the entry of a final judgment permanently enjoining him from violating certain provisions of the federal securities laws and ordering him to pay a $40,000 civil penalty.
The Commission's Complaint 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 on human trauma victims in hospitals because of safety concerns about Hemopure. As alleged, during the next eight months, Biopure failed to disclose the imposition of and reasons for the clinical hold while making public statements about its 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 because of extensive and significant deficiencies in Biopure's application and because of concerns about the lack of safety and efficacy of Hemopure. Biopure, however, issued public statements and Commission filings 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 Biopure continued to make misleading statements until December 2003 while simultaneously raising 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. According to the Complaint, Rausch was aware of the true status of Biopure's FDA applications, yet reviewed, approved, and, in several instances, signed Biopure's misleading statements. The Commission previously filed a civil injunctive action on September 14, 2005 against Biopure and three other Biopure executives concerning their roles in this matter.
Simultaneously with the filing of the Complaint, Rausch, without admitting or denying the Commission's allegations, consented to the entry of a final judgment that permanently enjoins him from aiding and abetting violations of Section 13(a) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-11 and 13a-13 thereunder, and requires him to pay a civil penalty of $40,000.
For further information, see Litigation Release No. 19376 (September 14, 2005)(Biopure and others charged by the Commission).
