Sweeping fraud has been alleged against Stemedica, a stem cell medical research company courted for Bermuda by former premier Ewart Brown.
Meanwhile, the company, which dismissed the accusation as “completely false, without merit, baseless and without evidence”, remained optimistic about bringing its clinical trials to the island.
The complaint, filed on April 6 by investors Tiara Holdings LLC, accuses the company and Stemedica’s founders of hoodwinking investors out of millions over nearly ten years, using cash raised for experimental treatment of Alzheimer’s disease as well as other clinical trials.
Tiara claims that Stemedica’s founders exploited financing to the tune of $110 million through “excessive compensation and lavish personal expenses”, instead of developing the commercial stem cell operation promised to investors.
The case, with Clark County district court, Nevada, seeks compensation and damages after “oppression, fraud and malice” by Stemedica’s founders and partners, who the plaintiffs say engaged in “a chronic and systematic pattern of self-dealing, fraud, misappropriation of assets and business opportunities to enhance their personal and financial positions”.
In a statement last night, the company said it intended to “vigorously defend itself against this complaint”.
The suit is levelled at Stemedica’s top three figures: Roger Howe, executive chairman, and his brother Maynard Howe, CEO and vice-chairman, along with its president and chief medical officer, Nikolai Tankovich.
Prominent in the complaint is Anthony Marlon, a Las Vegas doctor, businessman and Tiara shareholder who is also a member of Stemedica’s board of directors.
News broke in June 2007 of plans for adult stem cell research in Bermuda through a partnership between Dr Brown and his wife Wanda Brown, and Stemedica.
Bermuda’s proximity to the United States was one of the factors making the island favourable as a site, according to Maynard Howe. But the choice of location also drew queries from local and overseas medical sources sceptical of the island’s capabilities for supporting research.
Doctors also voiced concern at Bermuda’s lack of appropriate regulations — with the opening of a local clinic ultimately going on indefinite hold.
In August 2016, Dr Brown told The Royal Gazette that Stemedica had continued to pitch its case with the Bermuda Government.
The plan for a facility at the Brown-Darrell Clinic was being stonewalled for “purely political reasons”, Dr Brown said, after he had continually lobbied Michael Dunkley, the Premier, and his Cabinet.
At the time, the former premier said he had thrown substantial investments of his own into the venture — more than $400,000, to meet local approval for the clinic.
David McGuigan, Stemedica’s vice-president of marking and business development, said the company had maintained a “positive, interactive relationship with Dr & Mrs Brown for a decade”.
“On occasion, working closely with Dr & Mrs Brown, we have collaboratively approached government leadership within Bermuda to see if the climate was right to allow for the importation of Stemedica product to advance government-approved clinical trials.
“When we first began this process back in 2007, Stemedica had yet to receive USFDA [Food and Drug Administration] permission for similar trials proposed for Bermuda.
“Since our original efforts on island, Stemedica has received six IND (Investigative New Drug) permissions from the USFDA to conduct clinical trials in the United States. To date, our efforts to secure government approval in Bermuda to conduct a similar type of clinical trial have not been successful.”
But Stemedica remains “extremely enthusiastic about the positive role stem cells may play in the future of medicine”, Mr McGuigan said, adding that the company looked forward to “working closely with Dr & Mrs Brown in our efforts to bring highly-disciplined, government-approved clinical trials to Bermuda someday”.
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