SEC probe of Kandi Technologies has risen to a formal investigation

The Securities and Exchange Commission is conducting a formal investigation of Kandi Technologies Corp. (Nasdaq: KNDI), a Chinese company that has been the subject of several Sharesleuth stories.

Kandi did not mention the investigation in the press release it issued last week to announce its fourth-quarter and full-year earnings. Instead, it disclosed the probe in its annual SEC filing, in the middle of a long list of potential risk factors.

Kandi offered no details on the nature of the investigation, which began in November. It said only that it was furnishing documents and other information to the SEC’s regional office in Denver.

“As indicated in the subpoena, the investigation is a fact-finding inquiry and does not mean that the Company or anyone has broken the law,’’ Kandi said in the filing. “The Company has cooperated, and is cooperating fully, with the SEC in this matter and will continue to supply the SEC with whatever additional information and material that is requested.”

The fact that the SEC has issued a subpoena indicates that the probe has moved beyond the informal stage and now is classified as a formal investigation; According to a guide on the SEC’s website, its enforcement attorneys cannot issue subpoenas unless the commission authorizes a formal investigation.

A formal order of investigation allows the SEC’s enforcement staff to compel testimony from officers, directors and employees, as well as third parties, such as suppliers, customers and other business partners.

Kandi noted in the annual filing that it does not anticipate a negative result. But it also said it could provide no assurance “that any final resolution of this investigation will not have a material and adverse effect on the Company’s financial condition and results of operations.”

STOCK HITS NEW HIGH

Kandi’s stock jumped more than $4 last Monday, to a record closing price of $21.41, after the company put out its earnings release. Kandi said revenue for the fourth-quarter was up more than 90 percent from the same period a year earlier, primarily because of a surge in electric vehicle sales tied to a Zipcar-like rental program in China.

Kandi said revenue for the full year rose 46 percent, to $94.5 million. But the company posted a net loss of $21.1 million, largely because of changes in the fair value of warrants issued in connection with share placements.

Kandi’s stock has given back most of the post-earnings gain, in part because the company announced the sale of 606,000 additional shares, priced at $18.24. The deal generated $11 million in proceeds, before fees and expenses.

Kandi’s stock closed Thursday at $15.70, giving the company a market capitalization of roughly $630 million. However, its shares moved sharply higher in early trading Friday, reaching a peak of $17.48.

QUESTIONS ABOUT VEHICLE SALES

A Sharesleuth investigation in 2011 raised questions about Kandi’s claim that it sold more than 3,700 of its electric vehicles in the United States the previous two years.

Our survey of dealers, distributors and others familiar with Kandi’s activities found that fewer than 1,000 Americans had purchased the company’s low-speed, golf cart-like vehicles in that period.

The wide discrepancy between the figures was significant because electric-vehicle sales accounted for roughly 20 percent of Kandi’s reported revenue for 2009 and 2010. In addition, Kandi raised more than $26 million through share placements that relied partly on representations about the progress of the car business.

Kandi said at the time that it stood by its sales numbers. But it later disclosed in a footnote in its 2012 annual report that more than half of the cars it sold in 2010 were actually gas-powered rather than electric.

That revelation meant that Kandi’s electric-vehicle sales dropped significantly from 2009. It also meant that it would have been impossible for the company to have sold 1,005 electric cars in the second quarter of 2010 — as it claimed in its earnings release for that period —  because the total number that it sold for the entire year was just 658.

Sharesleuth reported last year that U.S. customs records also contradicted the sales claims that Kandi made in its quarterly and annual SEC filings.

Kandi reported selling more than 4,600 electric cars from 2009 through 2011, primarily in the United States. But customs records showed that fewer than 1,200 Kandi-branded cars came through American ports in that time.

QUESTIONS ABOUT STOCK TRANSACTIONS

Sharesleuth also has reported extensively on certain elements of the reverse-merger transaction that gave Kandi a listing on the U.S. markets in 2007.

We found that a little-known Canadian named S. Paul Kelley and several equally anonymous partners helped package Kandi and other Chinese companies for reverse mergers, prepare them for U.S. listings and promote them afterward.

In some cases, the people behind the deals fronted the legal, accounting and investor-relations expenses for the companies.

In return for their assistance, Kelley and the other participants in the venture got millions of shares of stock at low, pre-market prices. Their roles were not discussed in the companies’ SEC filings, nor were the share deals disclosed.

Sharesleuth also found that millions of shares that purportedly went to the top officers of the shell companies used in the reverse-merger deals appear to have been transferred to other parties, with little or no disclosure.

AN UNPAID DEBT DISAPPEARS

Kandi’s latest annual filing contained another unusual note related to the 2007 reverse merger.

Kandi said it was unilaterally canceling an $841,251 debt it owed to a former shareholder that had covered certain expenses related to the merger and the company’s U.S. market listing.

Kandi said that the shareholder, Ever Lotts Investment Ltd., had provided the funding under an oral agreement and had never requested repayment. Kandi said it recently tried to contact Ever Lotts regarding the debt, but was unable to do so.

Kandi said that given the amount time that had elapsed since the money was advanced – and the inaction by Ever Lotts — any future claim for repayment would likely be barred by the statute of limitations.

HIDING IN PLAIN SIGHT?

When Sharesleuth went looking for Ever Lotts, we found its name in a January SEC filing related to another U.S.-listed Chinese company.

According to the filing, Ever Lotts purchased roughly 850,000 shares of China Recycling Energy Corp. (Nasdaq: CREG) from another entity that ranked among that company’s biggest shareholders.

The filing said that Ever Lotts paid $1.28 million, or $1.50 a share, to Great Essential Investments Ltd. under an agreement that was signed on Sept. 20.

The filing also said that a second entity, Keen Merit Investments Ltd., bought 2 million shares of China Recycling Energy from Great Essential Investments for $1.50 a share.

Sharesleuth’s previous investigation into Kandi and 10 other Chinese reverse-merger companies that were packaged and promoted by the same group of players found that Keen Merit was among the parties that received stock through those deals.

SEC filings show that Keen Merit got shares in at least three of those companies – Telestone Technologies Corp. (Nasdaq: TSTC), New Oriental Energy & Chemical Corp. (formerly Nasdaq: NOEC) and China INSOnline Corp. (formerly Nasdaq: CHIO).

Kandi’s inability to make contact with Ever Lotts is puzzling given that Kandi’s U.S. law firm, McKenna Long & Aldridge LLP, also represents China Recycling Energy and presumably could have asked that company for help.

The lawyer at the firm who usually represents Kandi did not respond to a request for comment.

China Recycling Energy’s stock has risen sharply since Ever Lotts and Keen Merit entered into their share purchase agreements. If the two are still holding their stock, they are ahead nearly $8 million on their original $4.3 million investment.

People behind Twitter suit have history of questionable dealings

The principals of two financial firms that sued Twitter Inc. for $124 million in damages have a history of dealings with questionable companies and questionable partners.

Continental Advisors SA and Precedo Capital Group Inc. say Twitter thwarted their efforts last year to line up investors for a fund that would have acquired illiquid, restricted stock from the social-media company’s employees, contractors and other early shareholders.

Twitter is poised for an initial public offering that could value the company at more than $11 billion. Continental Advisors and Precedo Capital alleged in their suit that Twitter never intended to allow the private share deals to go forward. Instead, they claim, Twitter wanted to use the process to help determine a price for the IPO.

CONTINENTAL ADVISORS

Continental Advisors, which is domiciled in Luxembourg, is headed by Andreea Porcelli and Mark Porcelli, a husband-and-wife team who previously worked as stock brokers in the United States.

Sharesleuth is very familiar with the couple’s prior activities. Andreea Porcelli once was a director of AccuPoll Holding Corp., a publicly traded company that marketed touch-screen voting machines. SEC filings show that its financial backers included the children and business associates of financial felon Sherman Mazur.

Continental Advisors also was the placement agent for AccuPoll for a series of convertible preferred stock sold in 2005.

Before that, she was a director of Junum Inc., another public company that had ties to Mazur and a second convicted felon, Regis M. Possino.  In addition, Continental Advisors was a placement agent for Material Technologies Inc. (later known as Matech Corp.), which had links to one or both of those men.

Shares of AccuPoll, Junum and Material Technologies were marketed to foreign investors in the late 1990s and early 2000s by unlicensed boiler-room style brokerages operating from Europe, Asia and other offshore locations. People who bought shares in the companies through those operations lost nearly all of their money.

Mazur and Possino both served prison time for fraud in the 1990s. They were indicted again last year in connection with an alleged securities “pump-and-dump’’ network that took more than $31 million from investors around the world.

The indictment identified Mazur and Possino as the ringleaders of two intertwined fraud rings.

The court documents did not mention Accupoll, which morphed into Rudy Nutrition Inc. in 2008 and was used as the vehicle for another pump-and-dump scheme that the SEC said netted more than $11 million in illicit profits.

Sharesleuth’s research also found that Andreea Porcelli was sued in 2009 by a stock promoter named Timothy T. Page, who has been the subject of at least two SEC regulatory proceedings.

Page alleged in the complaint that Porcelli sold 2.7 million shares of another company’s stock to foreign investors as part of placement agreement, but failed to forward the proceeds. Page alleged that Continental Advisors was to be the escrow agent for the share transactions.

According to the suit, the shares were originally owned by Canturio Funds LLC, an entity linked to Martin T. Cantu. The SEC brought charges against Page and Cantu in 2009 in connection with a fraud scheme involving shares of a company called ConnectAJet.com Inc., which purported to have developed a real-time, online booking system for private jets.

The SEC said that no such system existed, and that ConnectAJet was part of a pump-and-dump scheme. Page and Cantu were found liable for securities violations and were ordered to pay nearly $3.8 million in disgorgement, penalties and interest.

Cantu also was indicted on criminal charges in connection with the ConnectAJet scheme.

The SEC also brought separate charges against Page in 2009 in connection with the unregistered sale of shares in two other companies. He settled without admitting or denying guilt, and agreed to a bar on virtually all activities involving penny stocks.

The judge hearing Page’s suit against Porcelli dismissed it without prejudice, on jurisdictional grounds. Porcelli had argued that since she and her husband lived in Italy rather than the United States, the U.S. District Court in California was the wrong venue.

PRECEDO CAPITAL

Precedo Capital was incorporated in Delaware and operates from Arizona. Its managing partner, Timothy D. Moran, also is a former stock broker.

According to a Financial Industry Regulatory Authority document, Moran was terminated by FSC Securities Corp. in 2011 for referring clients to an unapproved investment fund without prior approval.

FINRA suspended Moran’s registration earlier this month for failing to comply with an arbitration award or failing to respond to the agency’s questions regarding that award.

FINRA also is investigating Moran’s activities in raising money for the investment fund, which turned out to be a fraud. According to the allegations in the FINRA document, Moran’s customers invested nearly $1.7 million in the investment fund. It says he failed to disclose that he had personally provided $150,000 to the fund or that he had received more than $200,000 in compensation for obtaining additional capital.

FINRA also alleged that Moran provided false information to its representatives. Although the regulatory authority did not identify the investment fund, other documents show that it was Hampton Capital Markets LLC.

The operator of the fund, Thomas L. Hampton, was hit with criminal charges last year in connection with the fund’s collapse. He pleaded guilty in April to a single count of fraud, admitting that he concealed millions in losses He was sentenced to 30 months in prison.

The Arizona Corporation Commission also brought proceedings against Moran, Hampton and Hampton Capital, alleging that they were offering or selling unregistered securities and were engaged in fraud in connection with the placement of those securities.

THE TWITTER SUIT

Continental Advisors and Precedo Capital filed their suit against Twitter in federal court in New York. They said in their complaint that they had teamed up with GSV Capital Corp. (Nasdaq: GSVC) to market a fund that would be called @GSV Fund LLP and would hold only Twitter stock.

GSV Capital is a California company that acquired a portfolio of pre-IPO shares in sought after Internet companies, including Twitter, Facebook Inc. (Nasdaq: FB) and Groupon Inc. (Nasdaq: GRPN). According to the suit, Twitter had authorized GSV Capital to facilitate a secondary market for its nontrading shares.

Continental Advisors and Precedo Capital said that they had found people willing to buy the equivalent of $278 million in Twitter stock through the @GSV Fund. They alleged that the failure of Twitter and GSV to go forward with the transactions cost them millions in expenses, commissions and other potential gains.

Twitter was quoted in news reports as saying that it had no dealings with Continental Advisors or Precedo Capital.

Big Rockwell Medical shareholder lets large block of warrants expire

One of Rockwell Medical Inc.’s (Nasdaq: RMTI) biggest long-term shareholders let warrants to buy more than 860,000 shares expire rather than pay $7.18 a share to exercise them.

David A. Hagelstein said in a Securities and Exchange Commission filing that a trust he controls did not exercise the warrants by their July 31 expiration date. Rockwell’s stock closed that day at $5.05.

Hagelstein had paid $1.9 million to acquire the warrants from their original holders.

Hagelstein disclosed in the same filing that he had purchased an additional 164,241 Rockwell shares on the open market, at prices ranging from $3.48 to $5.33. He said he owned 1.99 million Rockwell shares, through two trusts. That amounted to just under 5 percent of the company.

Rockwell’s stock closed Tuesday at $5.68, off 33 cents. Had Hagelstein exercised the warrants, the company would have received more than $6 million in additional capital.

Rockwell said in its proxy filing in April that Hagelstein controlled 2.67 million shares, including the warrants. That equaled a 12 percent stake, making him its third-largest shareholder after Chief Executive Robert L. Chioini and Richmond Brothers Inc.

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The curious touting of Kandi Technologies (and Renren … and Gevo… and Emerald Oil…)

The shares of Kandi Technologies Group Inc. (Nasdaq: KNDI) more than doubled last month, aided by an eye-popping surge in volume that followed a routine press release.

Kandi’s stock shot from $3.92 on June 4 to an all-time high of $8.50 on June 11, after the company announced that the Chinese government had approved the electric car it is developing with Geely Automotive Holdings Ltd. for sales and eventual subsidies.

Trading volume on the day that the release came out topped 18.7 million shares, an amount roughly equal to Kandi’s public float. Since then, an additional 82 million shares have changed hands.

Sharesleuth, which previously raised questions about Kandi and the people who helped bring it public, detected a spate of unusual activity on stock message boards and social media sites at the time the company’s shares were surging.

We identified a pattern of postings, on multiple sites under multiple user names, which suggested a coordinated effort to tout Kandi’s shares. Among other things, a group of new posters appeared on the Kandi message board at Yahoo Finance, issuing baseless price targets for the company’s stock, predicting an imminent short squeeze and even suggesting that Kandi was a buyout target.

We noted that several of the posters – “megsboats’’ and “stockticklers,” for instance — were touting three other companies on the Yahoo Finance boards at the same time they were touting Kandi. Those companies were Renren Inc. (NYSE: RENN), the National Bank of Greece (NYSE: NBG) and Tranzbyte Corp. (Pink Sheets: ERBB).

We also noted that at least six Twitter accounts began posting about Kandi, with a common set of messages. Like the posters on Yahoo Finance, the people behind the Twitter accounts touted Renren, National Bank of Greece and Tranzbyte, too.

Their tweets, combined with dozens of additional ones on accounts whose links led to stock-promotion sites, made it appear that Kandi had generated more buzz in social media circles than it actually had.

At the end of that week, just after Kandi’s shares hit new high in intraday trading, something unusual happened. Nearly all of those promotional posts about the company disappeared from the Yahoo boards, along with the posters. The messages promoting Kandi on the Twitter accounts we were watching also were deleted, as were some of the tweets touting Renren, Tranzbyte and the National Bank of Greece.

Although the people behind the tout campaign tried to make the messages disappear, some of their posts were preserved elsewhere, through Google’s caching system and the Nasdaq exchange’s own summary of social media posts about public companies.

Here, for example, is a tweet that was deleted from an account called @canadapetro:

CanadaPetro KNDI

Here is another that was deleted from an account called @LVhotels:

vegas SinCityLV KNDI

Here is a third message, from an account called @GoldMining:

goldsilvermining KNDI

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Stock promoter pleads guilty in $30 million pump-and-dump case

Federal prosecutors have reached a plea agreement with one of 15 people alleged to have participated in an international pump-and-dump ring that netted more than $30 million.

Court records show that Mark Harris, a stock promoter who lives in Arizona, pleaded guilty to conspiracy in one of two related criminal cases. According to a document submitted last week, Harris will not be sentenced until after the trials in those cases, which currently are set for next March and June, respectively.

It is unclear whether Harris has agreed to testify against the other defendants in the case. A filing spelling out the specifics of his plea deal was sealed by the judge.

Prosecutors have identified the architects of the two schemes as Regis M. Possino, a disbarred lawyer with convictions for drug dealing and fraud, and Sherman Mazur, a former real estate mogul who also has a prior conviction for fraud. They once operated from a shared office space in Santa Monica, Calif.

Possino and two other defendants, Edon Moyal and Colin Nix, were spotlighted in previous Sharesleuth investigations (see stories here and here ) .

The indictments announced earlier this year allege that Possino and Mazur headed two intertwined networks that fraudulently inflated the share prices of small public companies before dumping their holdings on unsuspecting investors.

The indictments said the participants in the schemes acquired a large percentage of the shares in those companies and distributed those shares to nominees to conceal their ownership. They boosted the share prices through manipulative trading and misleading press releases, then sold the shares.

Authorities said the schemes defrauded more than 20,000 investors in the United States and abroad. They said the participants in one set of alleged pump-and-dumps reaped more than $18 million, while those in the other made at least $13 million.

Harris, Possino, Moyal and Nix are defendants in both cases.

The public companies used as vehicles in the schemes included Sports Endurance Inc. (OTCBB: SENZ); GenMed Holding Corp. (OTCBB: GENM) and BioStem U.S. Corp. (OTCBB: HAIR).

According to an article in the Vancouver Sun, Harris made a fortune in the 1980s and 1990s working for offshore boiler rooms that used high-pressure sales tactics to sell shares of dubious companies to investors around the world.

Those activities were disclosed as part of a contentious divorce case. More recently, Harris has worked to promote the shares of penny-stock companies. Among other things, he paid others to conduct tout campaigns on behalf of those companies.

 

Florida jury convicts Mitchell J. Stein in Signalife fraud case

A jury in Florida has found Mitchell J. Stein guilty on all 14 counts related to a multimillion-dollar  manipulation scheme involving shares of Heart Tronics Inc. (Pink Sheets: HRTT), formerly known as Signalife Inc.

Signalife was featured in a Sharesleuth investigation in 2008. That story presented evidence that Stein, a lawyer who split his time between Florida and California, secretly controlled the company.

It also suggested that Stein and others had engaged in market manipulation with the help of consultants who got millions of dollars in stock.

Stein was arrested in December 2011 under an indictment charging him with securities fraud, mail fraud, money laundering, conspiracy to commit mail fraud and wire fraud, and conspiracy to obstruct justice.

The Securities and Exchange Commission also filed a civil case against Stein, the company and its co-chief executives, alleging that they falsified sales, issued misleading press releases and committed numerous other violations. That case is pending.

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Customs records contradict Kandi Technologies Corp.’s electric-vehicle sales claims

Customs records do not support Kandi Technologies Corp.’s (Nasdaq: KNDI) claim that it sold thousands of electric cars in the United States, a Sharesleuth investigation found.

The records, which originated with the Department of Homeland Security, reinforce our earlier findings that Kandi greatly exaggerated the sales of those vehicles.

The Chinese company has said in Securities and Exchange Commission filings that it sold more than 4,600 of its mini cars from 2009 through 2011. For most of that period, the United States was the main market for the vehicles.

But a database containing detailed cargo information for vessels delivering goods to U.S. ports shows that fewer than 1,100 of Kandi’s cars were ever shipped here.

The database was created by ImportGenius.com, an Arizona company that helps businesses find sales prospects, evaluate suppliers and monitor rivals. It contains more than 79 million records drawn from the bills of lading for all ocean-freight imports.

Sharesleuth’s investigation turned up a number of discrepancies between Kandi’s reported sales of its low-speed, battery-powered cars and the actual deliveries of those vehicles to American ports.

For example:

– Kandi said in an SEC filing and an earnings release that it sold 1,141 cars in the United States in the first nine months of 2009. But the Customs records show that only 203 were delivered to American ports in that period. They also show that just 143 additional vehicles were delivered in the last three months of that year.

– Kandi said in an earnings release in 2010 that one of the main contributors to its revenue and income growth was a “strong second quarter contribution from U.S. sales of the super mini Kandi Coco.” Kandi previously had reported selling 1,005 electric-powered Cocos in that quarter, primarily in the United States. But Import Genius’ database shows that just 156 of the cars were delivered to American ports that year.

– Kandi disclosed in its annual SEC filing last year that only 658 of the 1,618 cars that it reported selling in 2010 were actually electric, and that the rest were gasoline-powered. That unexplained revision means it would have been mathematically impossible for Kandi to have sold 1,005 electric cars in the second quarter of that year, as it claimed.

The above examples suggest that the gains in electric-car sales that Kandi reported during pivotal periods in 2009 and 2010 were illusory. The company’s public statements regarding those sales contributed to spikes in its stock price and trading volume, and allowed certain parties to sell shares at peak levels.

Kandi, through its U.S. law firm, declined to comment on the discrepancies.

Kandi has said that because it sells its vehicles to middlemen who export them to the United States, Europe and other markets, it has no specific knowledge of where those products end up. Nevertheless, the company expressly stated in its SEC filings and earnings releases that the bulk of its car sales in 2009 and 2010 were “U.S. sales.”

The Customs data shows that although Kandi reported selling around 2,000 electric cars in the United States in the first nine months of 2009 and the second quarter of 2010, only about 500 were delivered to American ports in those years..

 

mini2Kandi said in an SEC filing that it sold 1,077 cars in 2011. It did not specifically say that those sales were in the United States. But with the exception of a purported order from Italy that has yet to materialize, it did not report any large sales elsewhere in the world.

Our analysis of the records in Import Genius’ database showed that 290 of Kandi’s mini cars were delivered to American ports in 2011.

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Houston American Energy abandons heavily touted Colombian property

Houston American Energy Corp. (AMEX: HUSA) has given up its interest in a Colombian oil property that it once claimed held as many as 4 billion barrels of reserves.

Houston American said in a Securities and Exchange Commission filing that it transferred its 37.5 percent stake in the CPO-4 prospect to its partner, SK Innovation Co. Ltd., of Korea.

Houston American – which was the subject of a Sharesleuth investigation in 2010 — did not receive any payment. But it added that the move released it from any claims for past, present or future capital calls related to the joint operating agreement with SK Innovation.

Houston American, SK Energy and a third partner, Gulf United Energy Corp. (Pink Sheets: GLFE), have drilled three wells on the Colombian property. All three were unsuccessful, and were plugged and abandoned.

Houston American’s shares traded for more than $20 as recently as July 2011, just before drilling began on the initial well. The company’s stock closed Tuesday at 21 cents.

Houston American had said in SEC filings and investor presentations that the CPO-4 prospect, in Colombia’s Llanos Basin, was estimated to hold anywhere from 1 billion to 4 billion barrels of recoverable reserves.

It announced in late 2011 that it encountered “strong shows of hydrocarbons” at the first well, Tamandua #1. But it later said that the well was being abandoned, in part because of damage to the formation during the drilling process.

Houston American said last April that it had received three subpoenas from the SEC as part of a formal investigation into the company. It has since disclosed that the investigation appears to be focused on claims about the resource potential of the CPO-4 prospect.

Houston American said in the announcing regarding the relinquishment of its interest in CP0-4 that it still had roughly $10 million to finance exploration activities elsewhere in Colombia.

Houston American has a 12.5 percent stake in a prospect known as Serrania. One of its partners there is Canacol Energy Ltd. (TSX Venture Exchange: CNE). Canacol acquired a 37.5 percent interest when it absorbed Shona Energy Co. last year.

The other partner at Serrania is Hupecol Operating Company LLC. Houston American has been involved with Hupecol on several earlier projects that were more successful than CPO-4.

Houston American has said that it expects the first well to be drilled at Serrania this year.

 

Judge sides with Rockwell Medical in wrongful-termination case

A federal judge has issued a tentative ruling in favor of Rockwell Medical Inc. (Nasdaq: RMTI) in a wrongful-termination suit brought by its former head of drug development, who was fired in September 2011..

Dr. Richard C. Yocum said in his suit that he was fired because he repeatedly complained to Chief Executive Officer Robert L. Chioini about possible violations of Securities and Exchange Commission and Food and Drug Administration rules.

The judge hearing the case did not rule on whether Rockwell Medical had, in fact, committed any violations. Instead, he considered the more narrow issue of whether the company was within its legal rights to fire Yocum.

Rockwell Medical, which makes and distributes dialysis products, is based in Wixom, Mich. The company had argued that Michigan is an “employment at will’’ state, which means that businesses can fire workers for any reason, or no reason. One of the exceptions to that rule is if an employee is fired in retaliation for reporting improper activity, either to management or outside bodies, such as regulatory agencies.

Yocum worked from his home in California, which also is an employment at will state. The law there does not require a worker to report improper activity to an outside agency to qualify for whistleblower protection.

The judge, Gonzalo P. Curiel, said in his tentative ruling that there was an “absence of evidence’’ linking Yocum’s firing to any protected activity. Curiel also said he was prepared to rule against Yocum on his claim that the firing constituted the intentional infliction of emotional distress. Rockwell Medical had noted in court filings that Yocum was soon hired by another medical company, at a higher annual salary.

Finally, Curiel said that Yocum had not presented evidence demonstrating that Rockwell Medical owed him any unpaid wages. According to the court docket, the judge is preparing a final written order in the case.

Curiel still must issue a written order reaffirming Rockwell Medical’s request for summary judgment for the ruling to become official.

Yocum’s suit against Rockwell Medical was the subject of a Sharesleuth story last year.

Yocum said in his complaint that press releases the company put out in 2010 and 2011 made it appear that the clinical trials for a new product called Soluble Ferric Pyrophosphate (SFP) were going better than they actually were.

Yocum was Rockwell Medical’s vice president of drug development and medical affairs, and had primary responsibility for the SFP development program.

He said in his suit that Chioini not only ignored his concerns about the trials but caused Rockwell Medical to issue press releases that included statements directly contradicting what Yocum had told him.

Yocum also said that, based on the nature of the questions he received from analysts or investors, it appears that Rockwell Medical engaged in selective disclosure regarding details of those trials.

Among other things, Yocum alleged that Rockwell Medical:

–falsely claimed that the results of its earlier Phase IIb studies of SFP were positive, despite the fact that they failed to demonstrate that the treatment was effective.

–falsely claimed that the Phase IIb trials produced clear dosing data.

–falsely claimed that the company had an agreement with the FDA on the design of its Phase III clinical trials.

– announced an unrealistic date for bringing SFP to market, disregarding Yocum’s much longer timetable.

Rockwell Medical announced in February that one of its clinical trials for SFP showed that regular use reduced the need for erythropoietin stimulating agents (ESAs) by as much as 37 percent. The company has said that such a reduction could mean big savings for dialysis providers and their patients.

Rockwell Medical expects to announce the results of its other trials later this year. Those are intended to show that SFP is safe and effective.