The former head of drug development at Rockwell Medical Technologies Inc. (Nasdaq: RMTI) says the company and its chief executive knowingly issued false and misleading press releases and violated other securities laws.
Dr. Richard C. Yocum, who was fired from Rockwell Medical in September, alleged in a wrongful termination suit that he was ousted because he repeatedly complained to its chairman and CEO, Robert L. Chioini, about violations of Securities Exchange Commission and Food and Drug Administration rules.
Yocum said in his suit 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 questions he received from analysts or investors, it appeared that Rockwell Medical engaged in selective disclosure regarding details of those trials.
Because Yocum was fired from his job, which had a base salary of $298,000 a year, he could be viewed as having a grudge against Rockwell Medical. But his allegations are not the only red flags at the company.
Yocum’s successor, Dr. Annamaria Kausz, recently left Rockwell Medical after just seven months, adding to the turnover in its clinical-development program. The company provided no explanation for that departure in the press release it issued April 19 to announce the hiring of her replacement. In fact, it didn’t even mention her or say that she had resigned.
Sharesleuth also noted that Rockwell Medical took the unusual step last November of extending the life of 400,000 warrants it had issued in the fall of 2008 to a consultant who was later found to have participated in a massive fraud scheme at another public company.
That consultant, Michael J. Xirinachs, was one of Rockwell Medical’s co-founders.
The federal judge hearing the SEC’s civil case against Xirinachs and his company, Emerald Asset Advisors LLC, last week ordered them to pay as much as $10 million in disgorgement, interest and fines.
The 400,000 unexercised warrants gained more than $900,000 in value after Rockwell Medical pushed back the expiration date by six months, to May 4.
Rockwell Medical’s decision to grant Xirinachs and Emerald Asset Advisors the extension – for no additional consideration – sets up the possibility that they could use the additional profits to help offset the SEC judgment.
Rockwell Medical did not respond to a list of questions submitted to its investor-relations representative. In court filings, the company has denied Yocum’s allegations and has asked the judge to dismiss the case.