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 05/05/04  Appeals Court Upholds Fraud Verdict Against Asensio
   04/04/04  Asensio Charged Again
  
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12/24/03  How Asensio Duped Regulators                                                                            
  
     
                                                                                                                                                                                                                                                        

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The Second Fraud Verdict
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Update, May 5, 2004

In April, the United States Court of Appeals for the Fourth Circuit upheld the 2002 jury verdict which found that Asensio defrauded investors with his reports on Chromatic Color Sciences (CCSI).   The court simultaneously upheld the jury's decision not to award the plaintiffs damages.  The court's reasoning was that Asensio's fraud could not necessarily be separated from other factors affecting the stock price.

We have added an article about the case as well as the actual court ruling to the Reading Room.   The article ends with Asensio revealing that he (or was it the hedge funds who hide behind him) spent 1.5 million to fight the case.  That was far beyond what plaintiffs were seeking in damages.  It puts quite a perspective on Asensio's boast that he has never spent a dime to settle a case.  Perhaps not, but having to spend 1.5 million to avoid paying a dime is hardly an achievement.  Especially when a jury verdict of securities fraud,  affirmed by a trial court judge and now the Fourth Circuit appeals court comes with it.

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On March 28, 2002, a jury in South Carolina unanimously agreed that Asensio had violated the anti-fraud provisions of the Securities and Exchange Act.  Specifically, the jury answered YES to the following questions:

Did plaintiff Joe H. Miller, IV, prove, by a preponderance of the evidence each of the following elements:

First, that defendant, in connection with the sale of securities, made an untrue statement of a material fact or omitted to state a material fact that was necessary to make the statements that were made not misleading under the circumstances

Second, that the plaintiff justifiably relied on the defendant's alleged misrepresentation or omission.

Third, that the defendant acted with "scienter," which means knowingly with intent to defraud or with reckless disregard for the truth.

Fourth, that the defendant's conduct was a proximate cause of the injury to the plaintiffs.

 

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Here is a brief Q & A about the case.

Q.  Who brought the case against Asensio in South Carolina?

A.  Joe Miller and Robert Pearce, two individual investors who owned shares in a company called Chromatic Color Sciences.  They filed suit in federal court in Charleston alleging that they were defrauded by Asensio's pronouncements about the company.

Q.  Is the lawsuit available on-line?

A.  No.  However, the allegations are described in one of the judge's orders in the case.

Q.  Was Asensio ordered to pay damages to Miller and Pearce?

A.  No.  The verdict held that Asensio committed securities fraud, but did not award monetary damages.  Asensio was ordered to pay the plaintiffs' court costs.

Q.  Why did thestreet.com report that Asensio won the case?

A.  Perhaps because Asensio sent out a news release declaring that he had.  Yet he clearly knew otherwise.  Within days of the verdict, he filed several new motions in court.  One noted that the verdict "was in favor of Plaintiffs (though for no damages) and provided for the taxation of costs against Defendant."  Another asked the court to "enter judgment in favor of Defendant." Obviously, Asensio made the request because he knew the jury had done the opposite.

Q.  Is this case case related to the one by Hemispherx Biopharma (HEB)?

A.  No. This case was heard in federal court in South Carolina.  At issue was federal law--the anti-fraud provisions of the SEC Act.  The Hemispherx suit is a libel case tried in Pennsylvania state court.  Asensio seems to believe that the cases have common sponsorship because the legal team representing Miller and Pearce includes an attorney from the Hemispherx case.

Q.  What is the status of the Hemispherx trial?

A.   The case was tried in February 2002, with the jury finding that Asensio had not defamed Hemispherx.  However, the judge later ordered a new trial, due largely to Asensio's courtroom conduct. Asensio appealed the order, and various aspects of the case, but had no success.  The Appeals Court rejected his arguments, as did the Pennsylvania Supreme Court.  As of early 2006, the case appears to be awaiting a new trial date.  

Regardless of the outcome, Asensio may be hit with Hemispherx's legal costs from the first trial.  The argument here is evident; had it not been for his misconduct, a second trial would not have been necessary. 

Q.  Where can I obtain more information about the Hemispherx trial?

A.  A Wall Street Journal article from 2000 describes the early days of litigation between Hemispherx and Asensio, and a 2002 article from the Philadelphia Inquirer reports on the trial itself.  Some information is available on the court docket, but it does not appear to be a complete record of the case.   
 

Page Created 11/30/02 Updated 3/31/03  Updated 5/5/04    Updated 3/4/06