Posted on Sat, Jul. 02, 2005

Prosecutors charge cancer drug startup company was a fraud

CATHERINE WILSON
Associated Press

CORAL SPRINGS, Fla. - Jerry Chase Sr., founder of the Ford dealership
in the Boston suburb of Framingham, was looking for a hot investment
when he was impressed by a startup company that was developing a drug
it said destroyed cancer cells.

Helvetia Pharmaceuticals Inc. also offered grandiose claims of a 98
percent success rate, a five-year projection for a $164 million
operating profit and returns of 400 percent to 600 percent on a planned
initial public offering.

Hoping to score big if the company went public, Chase invested a total
of $456,000 in Helvetia in 2000 and 2001.

But the government says Helvetia was one of those too-good-to-be-true
investments. A 40-count indictment contends more than 50 investors lost
$3.5 million investing in Helvetia, a company led by two ex-convicts
who met behind bars while serving time for unrelated fraud.

While prospective investors were told in cold calls and online that
their money would fund clinics, operating expenses and other capital
needs, prosecutors say Helvetia's principals used it for personal
expenses. They allegedly use the money to buy homes, cars and clothing,
to take vacations and to pay credit card bills.

The company's founders - Nicholas Bachynsky, a doctor with impressive
credentials who lost his license, and Richard Anders, a stockbroker
banned from the business - are in jail awaiting trial Aug. 29 on
charges carrying possible 20-year prison terms.

Helvetia promoted the IPO to open clinics in Europe using a
breakthrough drug DNP. The substance is not approved for human use in
the United States, and prosecutors note its industrial uses extend to
pesticides and dye making.

Investors were told the $1 per share they would pay to get in on the
ground floor of the IPO, would fund an exclusive "intracellular
hyperthemia therapy" called DNP, short for 2,4-Dinitrophenol, that
produces heat to make cancer cells self-destruct.

Bachynsky, 63, focused on patients in Italy and Switzerland and was not
involved in company finances or fundraising, said defense attorney
Howard Srebnick.

"He devoted probably thousands of hours for dozens and dozens of
patients in Europe to improve their quality of life with the hope that
one day this would become a mainstream treatment for terminal cancer
patients," Srebnick said. "Once Dr. Bachynsky learned of financial
irregularities, he resigned."

Successfully arguing against bail last year, prosecutor Jeffrey Cox
claimed Bachynsky preyed on patients "at their most vulnerable state,
your honor, where they have no other options and they are at the point
where they have nothing else to lose but their life."

Anders, 51, Helvetia's president of investor relations, claimed at one
point that TV actor Ray Romano had kicked in $3.5 million, according to
investigators. Representatives for the star of the sitcom, "Everybody
Loves Raymond," did not respond to repeated requests for comment.

The defense claims the government improperly built its case in part on
what Anders told them when immunity offers were on the table in an
unrelated Tampa investigation in 2001 and again last year in the
Helvetia case. Prosecutors deny those allegations.

"He was betrayed the way they sucked the information out of him," said
defense attorney Jose Quinon. "That's his feeling. 'You all want to use
me, and then you abuse me.'"

Helvetia's headquarters was in a nondescript office tower, where the
company shared space in a small suite with side offices the size of a
doctor's examining room in this bedroom community 35 miles north of
Miami.

"The whole thing was very, very Mickey Mouse. I hired a private
investigator to check them out. There was just nothing to these guys,"
said Jerry Chase Jr., whose father kicked in a chunk of Helvetia's
early money. "My father believed to the very end that it was a true
story."

Chase and his father sued Helvetia officials over the father's
investment. They recovered $349,325 in a settlement in 2002.
Prosecutors say the payment was made with money solicited from
investors and was another example of how the company misspent its
money.

Prosecutors can count on help from Laurence Dean, Helvetia's chief
financial officer who was extradited from Barbados, and Arthur
Scheinert, who solicited investors as Helvetia's senior vice president
of marketing and incorporated the company. Both promised to testify
against Anders and Bachynsky when pleading guilty to fraud and
conspiracy charges.

Some of Bachynsky's patients, who were treated for up to $30,000, knew
he had been convicted in a health care racketeering case in Texarkana,
Texas, in 1989.

But prosecutors say few people knew a Texas-born doctor with cancer
died in Italy after DNP treatment coordinated by Bachynsky. The defense
notes the patients who were given the drug were terminally ill people
who had exhausted traditional treatment.

Unknown to investors, Bachynsky and Anders met while doing time for
unrelated frauds at Three Rivers Federal Correctional Institution in
Texas between 1993 and 1996.

Anders served a 3 1/2-year prison sentence for a penny stock fraud in
Georgia in 1995 and paid only $62,000 on a $1.3 million restitution
order. He also has told the FBI about handling money in a different
scam capitalizing on the lure of IPOs.

The Polish-born, U.S.-raised Bachynsky got 10 years in a fraud using
DNP. When the Texas Board of Medical Examiners yanked his license in
1987, it said, "DNP is a chemical compound with no proven therapeutic
value and usually has a number of harmful side effects."

The American Cancer Society's Web site says DNP, while still under
study, can boost immunity and is used to modify tumor cells in some
cancer vaccines.

It's all about money, not health.