The Second Fraud Verdict
Update, May 5, 2004
In April, the United States Court
of Appeals for the Fourth Circuit
upheld the 2002 jury verdict which found that Asensio defrauded investors with
his reports on Chromatic Color Sciences (CCSI). The court simultaneously
upheld the jury's decision not to award the plaintiffs damages. The
court's reasoning was that Asensio's fraud could not necessarily be separated
from other factors affecting the stock price. We have added an
article about the case as well as the actual court
ruling to the Reading Room. The article ends with Asensio revealing that he (or
was it the hedge funds who hide behind him) spent 1.5 million to fight the case.
That was far beyond
what plaintiffs were seeking in damages. It puts quite a
perspective on Asensio's boast that he has never spent a dime to settle a case.
Perhaps not,
but having to spend 1.5 million to avoid paying a dime is hardly an achievement. Especially when a jury
verdict of securities fraud, affirmed by a
trial court judge and now the Fourth Circuit appeals court comes with it.
______________________________________________
______________________________________________
On March 28, 2002, a jury in South Carolina unanimously agreed that Asensio
had violated the anti-fraud provisions of the Securities and Exchange Act.
Specifically, the jury answered YES to the following questions:
Did plaintiff Joe H. Miller, IV, prove, by a preponderance of the evidence each of the following elements:
First, that defendant, in connection with the sale of securities, made an untrue statement of a material fact or omitted to state a material fact that was necessary to make the statements that were made not misleading under the circumstances
Second, that the plaintiff justifiably relied on the defendant's alleged misrepresentation or omission.
Third, that the defendant acted with "scienter," which means knowingly with intent to defraud or with reckless disregard for the truth.
Fourth, that the defendant's conduct was a proximate cause of the injury to the plaintiffs.
_______________________________________________
Here is a brief Q & A about the case.
Q. Who brought the case against Asensio in South Carolina?
A. Joe Miller and Robert Pearce, two individual investors who owned shares in a company called Chromatic Color Sciences. They filed suit in federal court in Charleston alleging that they were defrauded by Asensio's pronouncements about the company.
Q. Is the lawsuit available on-line?
A. No. However, the allegations are described in one of the judge's orders in the case.
Q. Was Asensio ordered to pay damages to Miller and Pearce?
A. No. The verdict held that Asensio committed securities fraud, but did not award monetary damages. Asensio was ordered to pay the plaintiffs' court costs.
Q. Why did thestreet.com report that Asensio won the case?
A. Perhaps because Asensio sent out a news release declaring that he had. Yet he clearly knew otherwise. Within days of the verdict, he filed several new motions in court. One noted that the verdict "was in favor of Plaintiffs (though for no damages) and provided for the taxation of costs against Defendant." Another asked the court to "enter judgment in favor of Defendant." Obviously, Asensio made the request because he knew the jury had done the opposite.
Q. Is this case case related to the one by Hemispherx Biopharma (HEB)?
A. No. This case was heard in federal court in South
Carolina.
At issue was federal law--the anti-fraud provisions of the SEC Act. The Hemispherx
suit is a libel case tried in Pennsylvania state court. Asensio seems to
believe that the cases have common sponsorship because the legal team representing Miller and Pearce includes
an attorney from the Hemispherx case.
Q. What is the status of the Hemispherx trial?
A. The case was tried in February 2002, with
the jury finding that Asensio had not defamed Hemispherx. However, the
judge later ordered a new
trial, due largely to Asensio's courtroom conduct. Asensio appealed the
order, and various aspects of the case, but had no success. The Appeals
Court rejected his arguments, as did the Pennsylvania Supreme Court. As of
early 2006, the case appears to be awaiting a new trial date.
Regardless of the outcome, Asensio may be hit with Hemispherx's legal costs from
the first trial. The argument here is evident; had it not been for his
misconduct, a second trial would not have been necessary.
Q. Where can I obtain more information about the Hemispherx trial?
A. A Wall Street Journal article from 2000
describes the early days of litigation between Hemispherx and Asensio, and a
2002 article from the Philadelphia Inquirer reports on the
trial itself. Some information is available on the
court docket, but it does not appear to be a complete record of the case.
Page Created 11/30/02 • Updated 3/31/03 • Updated 5/5/04 • Updated 3/4/06