Medical Devices Law & Industry Report provides complete in-depth, interdisciplinary news coverage of all major developments in the rapidly changing medical...
By David McAfee
Feb. 12 — A former consultant for a Southern California medical device company pleaded guilty Feb. 11 to securities fraud and other charges for allegedly collecting nearly $2 million in research investments and then using the money to fund his own gambling and personal expenses, prosecutors announced.
Greg Ruehle, who was hired by Innovative California Biosciences International (ICBI) Inc., in La Jolla, Calif., to identify investors to pay for medical research, pleaded guilty to securities fraud and possession of stolen firearms. He allegedly took in $1.9 million from more than 160 would-be investors, many of whom received fraudulent stock certificates.
U.S. Attorney Laura E. Duffy for the Southern District of California said Ruehle’s “egregious securities fraud” is “simply unacceptable.”
“Business professionals who use their knowledge of industries and securities to prey on unsuspecting lay investors undermine the public’s confidence and ability to participate in the markets,” Duffy said in a Feb. 11 statement. “As this case demonstrates, they also jeopardize innovation and the success of small businesses.”
Ruehle, who lives in Oceanside, is accused of taking in almost $2 million from investors in Southern California and Minnesota for purported research into treatments for Parkinson’s and Alzheimer’s diseases. The criminal case was disclosed the same day as parallel civil charges were brought by the Securities and Exchange Commission.
The DOJ's criminal information filed Feb. 8 alleged that Ruehle issued investors fake stock certificates and failed to report any of the $1.9 million in investments to ICBI. The company planned to use funds he raised to develop technologies to transport therapeutic treatments through the blood-brain barrier for neurodegenerative diseases such as Parkinson’s disease and Alzheimer’s disease, according to the government.
When asked for proof that the investments were being used by ICBI, Ruehle allegedly faked a letter that looked to be printed on company letterhead and signed by the chief executive officer. The prosecution said it was later discovered that Ruehle misspelled the CEO’s name in the forgery.
ICBI CEO Ram Bhatt said Ruehle betrayed his “trusting friends.”
“His actions are not only despicable but he also delayed the development of what could have been a potential diagnostic test and disease altering therapy for Parkinson’s disease and other neurodegenerative disorders,” Bhatt told Bloomberg BNA in a Feb. 12 e-mail. “ICB International, Inc., is, however, committed more than ever to take its Blood-Brain Barrier Permeable SMART Molecules Technology to Parkinson’s and Alzheimer’s patients to mitigate their debilitation.”
In its civil complaint, the SEC said Ruehle was an unregistered broker fraudulently selling purported stock in ICBI. The defendant told investors he would sell them his own personal securities in the company, but he sold “far more” than he owned and what he did own wasn’t transferable, according to the SEC.
The SEC, which seeks a permanent injunction, disgorgement and prejudgment interest and penalties against Ruehle, further accused him of disseminating fake company stock certificates and other forged investment documents.
“We allege that Ruehle lied to investors, sent them phony documents to further his deception, and spent their money on living expenses and gambling,” Michele Wein Layne, director of the SEC’s Los Angeles Regional Office, said in a Feb. 11 announcement.
Ruehle, who further admitted to owning three stolen firearms, pleaded guilty to the criminal charges and agreed to forfeit the $1.9 million in proceeds and pay restitution to the victim-investors. He is scheduled to be sentenced before U.S. District Judge Michael M. Anello on May 2, at which time he could face up to 20 years in prison for the securities fraud and a maximum of 10 years for the firearms charge.
A representative for the defendant didn’t immediately return Bloomberg BNA’s request for comment.
The DOJ is represented by U.S. Attorney Laura E. Duffy and Assistant U.S. Attorneys Emily W. Allen and Aaron P. Arnzen. The SEC is represented by SEC attorneys Matthew T. Montgomery and Gary Y. Leung. Ruehle is represented by Donald Bruce Marks of Marks & Brooklier LLP.
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