Former Biopure executive to pay $40,000 in civil penalty for SEC violations

By Lisa Kerner

Erie, Pa., April 11 - Biopure Corp.'s former vice chairman of the board of directors and senior technology officer Carl Rausch agreed to pay a $40,000 civil penalty, according to an announcement from the Securities and Exchange Commission.

Rausch also consented to the entry of a final judgment permanently enjoining him from violating certain provisions of federal securities laws.

He did not admit or deny the commission's allegations, the release said.

The agreement came as the SEC filed a civil injunctive action in federal district court in Massachusetts against Rausch. The action was filed for Rausch's alleged role in what the SEC called Biopure's misleading public statements about the company's efforts to obtain Food and Drug Administration approval for its synthetic blood product, Hemopure, according to a release.

Rausch was charged with aiding and abetting violations of the reporting provisions of the federal securities laws in connection with misleading statements by Biopure between April and December, 2003.

The complaint alleged that, beginning in April 2003, Biopure received negative information from the FDA in regards to obtaining approval of Hemopure and failed to disclose the information, or falsely described it as positive developments.

Biopure was barred from conducting clinical trials of Hemopure on human trauma victims in hospitals by the FDA due to safety concerns.

In July 2003, the FDA told Biopure it did not approve Biopure's application for use of Hemopure in orthopedic surgery based on deficiencies in the company's application as well as safety and efficacy concerns.

Biopure issued public statements describing the FDA's communication as good news, causing its stock price to increase by over 20%. The company allegedly continued making misleading statements until December 2003, while raising more than $35 million from investors.

According to the complaint, Rausch reviewed, approved and signed Biopure's misleading statements.

Once the misleading disclosures became public, Biopure's stock fell almost 66% from its Aug. 1 price.

The SEC previously filed a civil injunctive action on Sept. 14, 2005 against Biopure and three other Biopure executives for their roles in the matter.

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