Real Cash in a Fake Blood Scandal

A former biotech executive has settled charges that he helped to inflate the company's stock price by misleading investors into thinking that regulators were going to approve his company's synthetic blood substitute for sale.

Howard Richman, the former head of regulatory affairs at Biopure Corp. of Cambridge, Massachusetts, agreed to pay $150,000 to settle Securities and Exchange Commission charges, which he neither admitted nor denied.

Richman, 56, of Houston, also is barred from serving as an officer or director of a public company, according to judgment entered into the U.S. District Court in Boston.

In 2003, the Food and Drug Administration cited safety concerns about Biopure's plan to test its artificial blood, called Hemopure, in clinical trials, and placed a hold barring the biotechnology company from conducting such trials in trauma settings such as emergency rooms.

Even so, the commission charged, the company continued to say publicly that it planned to obtain approval for trauma uses for the experimental blood product. While the company conceal the F.D.A.'s concerns, its price rose 20 percent and Biopure raised more than $35 million from investors.

By that fall, the actual status of Hemopure began to leak out, and the company's stock price fell sharply. In 2005, the S.E.C. brought civil fraud charges against Biopure and three of its executives.

Biopure settled the allegations, and two other company executives, former chief executive Thomas Moore and former general counsel Jane Kober, agreed to settle and pay fines of $120,000 and $40,000, respectively.

by Elizabeth Olson