Stem cell co. faked success: SEC

A stem cell company is in hot water with the linkurl:US Securities and Exchange Commission (SEC);http://www.sec.gov/ for falsely representing an early-stage experimental stem cell therapy as nearing human trials. Image: Wikimedia commons, Centers for Disease Control and Prevention's Public Health Image LibraryThe SEC yesterday (September 8) linkurl:filed charges;http://www.sec.gov/news/press/2009/2009-195.htm against linkurl:CellCyte,;http://www.cellcyte.com/ based in Bothell, Wash., as well a

By | September 9, 2009

A stem cell company is in hot water with the linkurl:US Securities and Exchange Commission (SEC);http://www.sec.gov/ for falsely representing an early-stage experimental stem cell therapy as nearing human trials.
Image: Wikimedia commons, Centers for
Disease Control and Prevention's
Public Health Image Library
The SEC yesterday (September 8) linkurl:filed charges;http://www.sec.gov/news/press/2009/2009-195.htm against linkurl:CellCyte,;http://www.cellcyte.com/ based in Bothell, Wash., as well as the company's former CEO and former chief scientific officer who were involved in the alleged deception, linkurl:according to Forbes.com.;http://www.forbes.com/feeds/afx/2009/09/08/afx6859405.html "The company really tried to take advantage of the hype over stem cells to give the false impression that they were on the verge of clinical trials when really it was just an early stage project that was going to require years of additional research and testing," SEC staff attorney Steven Buchholz told The Scientist. In October 2005, CellCyte licensed several compounds that could deliver stem cells to various organs in the body. At that time, they stated that the first organ repair human trials were scheduled to begin in 2008. Several news releases from the company, as well as the required SEC reports after the company became public in 2007, portrayed false progress in developing the treatment, including claiming to have received linkurl:US Food and Drug Administration (FDA);http://www.google.com/url?sa=t&source=web&ct=res&cd=1&url=http%3A%2F%2Fwww.fda.gov%2F&ei=ytynStKAGOKRtgfm5pCqCA&usg=AFQjCNEC-Qs0EIMQO8U_uagEsakq0iVJIg&sig2=DHjRAPr-DPA_Y2UcicBnQw approval to begin human clinical trials, the SEC said in a statement. In reality, however, "CellCyte did not know how to properly formulate the stem cell compound, had never attempted experiments with the compound to repair organs, and had not satisfied any of the FDA requirements to begin human clinical trials," according to the SEC statement. In addition, the SEC reports, CellCyte recruited the help of a Canadian stock promoter, who engaged in a promotional campaign that included millions of spam emails, faxes and newsletters which contained the false information about CellCyte's stem cell progress. During this time, CellCyte's stock price rose dramatically, reaching $7.50 per share and giving the company a market capitalization of nearly $450 million. Later, after the promotional campaign had been halted, the stock plummeted to less than one dollar in January 2008, and now sells for just 5 cents per share. "It really seems they took advantage of the whole promising stem cell field to give that false impression to investors," Buchholz said. The SEC reached a settlement between CellCyte and former chief scientific officer Ronald Berninger, who neither admitted nor denied the SEC's allegations, but agreed to pay a $50,000 penalty and be barred from serving as an officer or director of a public company for five years. A separate case against former CEO Gary Reys has not been settled. CellCyte describes itself in a 2005 press release regarding the licensing of the treatment as "a late-stage clinical development company" looking to develop new methods for using cord blood, adult, and peripheral stem cells for use in bone marrow transplants, heart repair, and other ailments. linkurl:Berninger;http://people.forbes.com/profile/ronald-w-berninger/16940 was trained as a chemist and received his PhD from the University of Pittsburgh in 1972. Prior to joining the CellCyte team in 2007, Berninger had worked with several other biotech companies, including Genespan Corporation, Cennapharm Corporation, and CellPro, helping to develop drugs and build companies, according to Forbes.com. linkurl:Reys;http://people.forbes.com/profile/gary-a-reys/16942 studied finance and accounting at the University of Washington, and has worked for more than 30 years in the pharmaceutical, biotechnology and medical device sectors, Forbes.com reported. In addition to the false statements made about CellCyte's stem cell therapy, the SEC further charges that Reys lied about his past employment and is seeking a monetary penalty, an injunction against further violations, and an order barring Reys from serving as an officer or director of a public company. CellCyte did not reply to two phone requests for comment. Update (9th September 2009): Just after this story was posted, CellCyte responded to The Scientist's requests for comment, stating that the claims the company made were based on information from the United States Department of Veterans Affairs (VA), from whom CellCyte had licensed the technology. "Once we realized the technology didn't do what the VA told us it would do, we discontinued working on that technology," said Randy Lieber, CellCyte's acting chief financial officer. The company is currently focusing solely on cell expansion and maintenance through the use of its patented bioreactor technology.
**__Related stories:__*** linkurl:School sued for fake cancer test;http://www.the-scientist.com/blog/display/55967/
[8th September 2009]*linkurl:Stem cell fraud...again?;http://www.the-scientist.com/blog/display/55879/
[6th August 2009]*linkurl:Life After Fraud;http://www.the-scientist.com/article/display/55772/
[July 2009]*linkurl:Fixing Fraud;http://www.the-scientist.com/article/display/55476/
[ March 2009]
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Comments

Avatar of: anonymous poster

anonymous poster

Posts: 26

September 9, 2009

Apparently the fraud perpetrated by this company cost some people (in aggregate) hundreds of millions of dollars. Presumably some officers and other insiders made at least a few million.\n\nIn my opinion, any penalty that does not exceed damages to the victims, cause financial ruin for the perpetrators and their families, and include prison could be encouraging this kind of fraud in the future, not discouraging it.\n\nHow about moving toward being a society where basic honesty, rather than large scale misrepresentation is the norm. The cost savings to all of us in time alone would be enormous.\n\nWhat is the point of allowing deceptive advertising, whether it is in biotech, new age health, "We'll clean 4 rooms of carpet for $24.99", or car dealer contracts with pages of fine print? I get tired of playing the game... of having to double-check everything to make sure it's not a ripoff.\n\nBaxter Zappa
Avatar of: Robert Birdwell

Robert Birdwell

Posts: 10

September 10, 2009

Too many people are claiming knowledge they simply do not have.\n\nOnce upon a time, there were people who called themselves "investigative journalists" who would stalk these claims until they uncovered the truth.\n\nSuch journalists no longer exist. They too are mouthpieces for the criminals who pay them.\n\nModern journalism, like science, is nothing more than an infomercial pitching this or that scam of the moment.
Avatar of: anonymous poster

anonymous poster

Posts: 125

September 10, 2009

One often ends up with fool's gold sold knowingly and unknowingly by the prospectors (scientists). It's so unfortunate and sad that medical research is increasingly motivated less by genuine altruism to better the health of mankind and more by profit, greed, and fame. There are those who defend that pursuit of tangible rewards by medical research is the best, albeit imperfect, motivation for the best and quickest results in a highly competitive environment. But, they forget that such motivation also engenders a temptation in the medical research to promote dubious or fraudulent products and treatments.
Avatar of: anonymous poster

anonymous poster

Posts: 5

September 12, 2009

I think if all the drugs and treatments were checked closely we would find that most of them are ineffective and could actually do more harm than good.
Avatar of: anonymous poster

anonymous poster

Posts: 5

September 13, 2009

I find it disturbing it was the SEC (they have their own problems a la Bernie Madoff)and not scientific peer review that opened up this can of worms. As a parent of a spinal cord injured young man I pay close attention to the world of research and have even tried to alert newspapers of possible fraud by researchers and find the door shut in my face. It's not so hard if you watch closely to see when academia becomes commercially oriented. One poster below blames the media for protecting the false claims of research, I have to agree with him. For example, a researcher gained fame by finding the first so called effective treatment for spinal cord injury, methylprednisolone. It was hailed as a great success and became the standard of care. Years later after some doctors disputed it's efficacy and safety it is no longer a standard of care and warnings have been issued against it's use as a treatment, yet if you search google news not one article about the demotion of that treatment, it only appears in hard to find scholarly articles.

September 13, 2009

\nHello Bob,\n\nWell done for reposting it. It seems that for now your post is on.\nYou're not the only one whose posting has been deleted. I wonder if The Scientist is under pressure by certain forces **in power** whose goal is to tamper with voices of disagreement and discontent.\n\nThanks\n\nRafaela\n\n
Avatar of: bob bob

bob bob

Posts: 5

September 13, 2009

Thanks, it was short lived though. When a researcher has ties with big pharma journals cave in

September 14, 2009

\nDear Bob,\n\nIt is upsetting to imagine that The Scientist might ultimately be confined to The Square of Irrelevance by researchers allied to big pharmas. They are using the tools of a **new hollywood** to indoctrinate the public in adverse health events of seismic proportions and educating us in their commitment, with the generosity of philanthropists, to make us immortal. \n\nFor better or worse The Scientist is based in Philadelphia, the City of Brotherly Love and the Cradle of Independence of the USA. I wish that the City of Brotherly Love was taken by its brave citizens and freed from the pervasive influence of this ?new Hollywood?. It seems as if this **new hollywood** is extending its tentacles to China, India, Japan etc. I guess that their goal is to make an impact in global health under the auspicious of **the best country in earth**.\n\nI wish that Philadelphians were properly and timely informed. They would certainly take their City from ** stranged pseudo citizens ** and restore their freedom at Liberty Place.\n\nLet?s not give in and let?s hope for the best,\n\nRafaela\n

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