The King’s Gambit: Valeant’s Big Secret

If the name Valeant Pharmaceuticals International doesn’t ring a bell, its business practices should. The Quebec-based drug manufacturer’s policy of implementing regular price increases that often run north of 100% has generated plenty of anger, a congressional investigation, constant press coverage and a subpoena from the U.S. Attorneys offices in both the Southern District of New York and the District of Massachusetts. But as strange as it may seem, a slim legal filing in California federal court is poised to make Valeant’s world rockier still. The story starts 50 miles northwest of Los Angeles in Camarillo, Ca. with R&O Pharmacy, a modestly-sized operation co-owned by veteran compounding pharmacists Russell Reitz and Robert Osbakken.

SIRF Wins Lawsuit And Strikes A Sharp Blow For Journalistic Freedom

The Southern Investigative Reporting Foundation has successfully concluded a litigation arising from its September 2014 story on Southern California-based medical device entrepreneur Anthony Nobles. Readers may recall that the investigation centered on Nobles, a high-profile Ferrari collector whose elaborate Halloween parties are regularly profiled in the press, whose affluence allowed him to own multiple homes, make large charitable donations and buy a $200,000 ticket on Virgin Galactic’s first commercial space flight. Our reporting revealed that Nobles claimed a series of graduate degrees that were likely purchased from a notorious online diploma mill whose founder pled guilty to issuing fake diplomas and will be sentenced in November, according to a recent Department of Justice filing. Additionally, we reported that Nobles’ previous efforts with publicly-traded companies were mired in controversy and investor litigation. On October 1 Nobles filed suit against the Southern Investigative Reporting Foundation and the two authors of the article, summer intern Keith Larsen and myself, alleging defamation and libel per se.

The Black World of Insys Therapeutics

Slowly but surely answers to the many riddles of how Insys Therapeutics could achieve its mercurial success are beginning to emerge. The Scottsdale, Ariz.-based pharmaceutical company has only one commercial offering, a sublingual Fentanyl formulation called Subsys, whose sales growth has managed to double its market’s size, to more than $500 million from an estimated $225 million since its approval and launch in March 2012, according to executives at rival companies. In turn, the upward march of the company’s share price has turned its growing legion of supportive brokerage analysts and money managers into minor geniuses. (Southern Investigative Reporting Foundation readers will recall Insys from an April 24 investigation of the drug’s mounting number of lethality cases and the company’s unusual marketing efforts.)

Therein lies the rub. Subsys is approved only to treat breakthrough cancer pain.

Update: Mr. Neuger and Mr. Fitzmaurice decide to pursue other opportunities

Editor’s note: A previous version of the story described Ron Blaylock as not investing in EcoAlpha. That is incorrect–he invested approximately $1 million. SIRF regrets the error. EcoAlpha Asset Management, a hedge fund that sought to capitalize on what it touted as the looming global natural resource scarcity, closed its doors last month. Southern Investigative Reporting Foundation readers will recall the fund from this January story that looked at the lack of disclosure surrounding the founder’s backgrounds, particularly of Neuger, who was the driving force behind AIG’s disastrous foray into securities lending, a gambit that required nearly $44 billion in emergency federal assistance.

Insys Therapeutics and the New ‘Killing It’

On the evening of July 1, 2014, Carolyn “Suzy” Markland, a 58-year-old Jacksonville, Fla., resident with a degenerative disc disease, took her prescribed medicine — a 400-microgram dose of a Fentanyl spray called Subsys — and went straight to bed. Despite the fact that she regularly experienced pain, taking Subsys was not an everyday affair for Markland. Her prescription had been filled several months prior but she almost never took the stuff; her longtime family doctor and pharmacist had expressed to her plenty of no-holds-barred skepticism about it. On the three occasions she had taken Subsys, her family noticed that its sedative and respiratory effects were noticeably sharper than those of another strong painkiller she took, Exalgo. On July 2, Markland visited Dr. Orlando Florete, her pain-management physician of five years, for a scheduled injection for her lower spine.

Irreproducible Results, Inc.

Editor’s note: SIRF did not calculate the size of the Longwood fund (and its three partners) in OvaScience, nor its value, using the most recent documents. It is approximately 19.5 percent of the 27.12 millions shares outstanding, worth just over $185.2 million. The 7 women in the Toronto test were clinically pregnant but have not delivered children. We regret the errors. Additionally, a reference to the company’s cash position was reflected to include the announced proceeds from a January equity offering.

@Undisclosedbackstory: The Hidden History of Social Media’s Financial Gurus (A Truly Occasional Series)

At any given moment, Joe Donahue, a cornerstone of the popular StockTwits investing community, and a veteran of a quarter century of trading, may be making another intraday call on a stock for his community of subscribers who pay him nearly $800 a year for his trading system. Financial social media, where a few minutes to sign up for an account is the only investment needed, allows participation in a community as active and diverse as the markets themselves. But it begs a question: Who, exactly, is giving all of this opinion and the analysis? Far Off, Unpleasant Things

Joseph William Donahue, one of the cornerstone bloggers of—and an investor in—the popular Stocktwits investor community, is a 25-year veteran of trading. He’s done a little bit of everything including founding a pair of hedge funds: one fund that he said reached $500 million in assets and a second fund with former Major League Baseball pitcher Todd Stottlemyre.

Who Owns Our Water?

Photo credit: Rohan Ayinde Smith

Editor’s Note: This story is the result of a collaboration between SIRF and the University of North Carolina’s School of Journalism and Mass Communications Fall 2014 Advanced Reporting Seminar. By: Claire Williams, Max Miceli, Corinne Jurney, David R. Pingree, Mary Helen Moore, Brian Freskos, Kate Grise, Sarah Headley, Bradley Saacks and Jenny Surane. North Carolina is fighting a bruising legal battle against Alcoa over the aluminum giant’s claim to a strip of the Yadkin River that it has long used to generate electricity. At the center of the dispute are a patchwork of federal and state laws that created a quid pro quo between the two: Alcoa could operate dams to make the electricity as long as whatever they did was “in the public interest.”

The public interest in this case was Alcoa’s aluminum manufacturing operations in rural Stanly County that employed thousands over the decades. That smelter is now gone.

The Past Imperfect: Mr. Neuger and Mr. Fitzmaurice Would Like Your Money, Again

The website of a new Minneapolis venture, EcoAlpha Asset Management, strikes a different chord for a hedge fund, holding itself out to the deep-pocketed as not just a way to maybe beat the market, but as a vehicle to economically engage with the vexing questions of access to natural resources, population growth, wealth creation and renewable energy. Its pitch to investors is simplicity itself: as countries around the world pour countless billions of dollars into solving these problems, EcoAlpha will (presumably) benefit mightily from owning the shares of companies and the physical assets that address these issues. Like many a nascent fund—EcoAlpha launched in early October—its investment team is heavily credentialed, with ample experience and prestige schooling. But the brief biographical sketches of  its co-founders, Win Neuger and Matthew Fitzmaurice, are most compelling for what is left out. Neuger, as chief of AIG Global Investment Corp., engineered and oversaw perhaps the most economically destructive episode of the entire global financial crisis: AIG’s securities lending portfolio’s headlong foray into mortgage-and asset-backed securities between 2005-2007, which ultimately forced the Federal Reserve to engineer a nearly $44 billion rescue.

Update: Michael Karfunkel’s Bridge To Nowhere

It’s not everyday that someone makes a $373 million grant of shares in a company he co-founded, but on November 12 that’s exactly what the foundation of a fellow named Michael Karfunkel did when it gave his son-in-law’s foundation over 7.21 million AmTrust Financial Services shares. But the seemingly innocuous grant disclosed on Friday afternoon, November 20, after the close of trading, becomes a lot more interesting when you understand that Barry Zyskind, the man who founded and manages the Teferes Foundation (the recipient of the shares) is the chief executive of AmTrust. As Southern Investigative Reporting Foundation readers will recall from our August investigation, the 71-year old Michael Karfunkel is one-half of a fraternal duo (his brother George is six years younger) that founded AmTrust, a high-flying insurance company. What our investigation uncovered was that the two brothers’ foundations—while certainly active grant-makers to synagogues and institutions connected to Brooklyn’s Haredi Judaism community—benefited mightily from using their foundations to maintain family control of AmTrust. With that in mind, SIRF took a hard look at the deal and it appears that charity is the last reason this was done.