BOSTON: The Securities and Exchange Commission is suing a group of individuals who used PR as part of a “pump and dump" scheme to promote a fake company known as Spencer Pharmaceutical Inc.
Jean-Francois Amyot and two other individuals allegedly disseminated false information about Spencer Pharmaceutical through two PR companies that Amyot controlled called IAB Media and Hilbroy, according to an SEC complaint filed in Boston federal court. The company was believed to have had an office in Boston. (San Francisco-based firm IAB Custom Media is a different firm and was not cited by the SEC).
Specifically, the defendants allegedly claimed in a string of false and misleading press releases that Spencer Pharmaceutical had received an unsolicited buyout offer from a Middle Eastern company for $245 million for all of its outstanding shares. Spencer Pharmaceutical or the agencies also allegedly placed information on websites and in newsletters, according to the SEC.
Before the supposed buyout offer, Spencer had said it was developing technology that would allow for the better absorption of drugs into patients' bodies. The technology was said to be useful in treating diabetes, brain cancer, Alzheimer's, and Parkinson's.
Most of the press releases were distributed through Marketwire, and some were posted in a public news outlet called RediNews.
Once the stocks reached a certain level, Amyot sold the nearly 6 million shares he had accumulated for about $6 million in early 2011, according to the SEC.
The federal agency is seeking permanent injunctions and disgorgements as well as interest and civil penalties. Amyot is believed to have relocated recently to the Bahamas, the SEC said.
The websites for IAB Media and Hilbroy have been deactivated.
Amyot did not return a request for comment sent to his Yahoo and Facebook email accounts.
IR experts explained that it would have been difficult for Amyot to perpetuate his alleged scheme through firms he did not control, because agencies tend to kick the tires of potential clients to make sure they are legitimate companies.
“You look to make sure the company has some sort of history, because nowadays you can make up any website,” said Patricia Baronowski-Schneider, president of Pristine Advisers, an IR and PR firm.
She added that newswires can at times be a secondary buffer to stop false information from spreading, and noted that most wire services require a firm to prove they are authorized to send out a release on behalf of a client.
"We proactively take steps to safeguard our clients' information; however, this situation involved a company acting in bad faith,” Marketwire COO Jim Delaney told PRWeek. “We pride ourselves on following the proper procedures and the required protocol, [however], as an industry, we need to work together to establish even higher standards for rigorous authentication.”
In November, PRWeb owner Vocus apologized for publishing a press release about a fake Google acquisition.