Why The Little Biotech Dismissed Its CEO

Why The Little Biotech Dismissed Its CEO

September 27th, 2011 // 12:07 pm @

A few weeks ago, Oxygen Biotherapeutics mysteriously dismissed ceo Chris Stern after stock market trading finished one day. There was little explanation offered at the time, other than an investigation by the board’s audit committee found problems with his “conduct” and its potential impact on the biotech, which is developing various products that would deliver oxygen to tissues in the body.

Now, though, some details have emerged, courtesy of the filing with the US Securities and Exchange Commission. As it turns out, Stern pumped up his resume and also conducted an undisclosed ‘related party’ transaction with a service provider, which gave him warrants three years ago that were worth an estimated $489,000 at the time.

Not only was Stern terminated for cause and did not receive any severance payments, the biotech has now informed the SEC and representatives of NASDAQ, suggesting further investigations may get under way. Shortly after he was dismissed, Oxygen released an email in which he wrote that “I am very surprised at this. I don’t agree and do not accept my termination, and I request this filing be stopped until the attorneys have talked. And then it needs to be changed” (see here).

Specifically, Stern’s doctorate was not obtained from Trinity University, but from Trinity College & University, an unaccredited institution. And Stern does not teach at the “St. Gallen Business School,” but teaches at “St. Galler Business School.” In both cases, his “statements inaccurately conveyed an association with more well-known and more highly-reputed institutions,” according to the SEC filing.

As for the warrants, in March 2008, Stern accepted an indirect gift of warrants to purchase approximately 66,667 Oxygen shares from Fiona International, a service provider at the time. The warrants were originally issued to Fiona with a five-year term and an exercise price of $3.705. Two months later, he had Oxygen enter into a purported consulting agreement with Fiona in order to disguise payments to Fiona for commissions on the sale of the stock to unnamed people, which the biotech determined should not have been paid because Fiona was not a registered US broker-dealer.

Under the agreement, Oxygen paid $87,500 in cash, 202,133 warrants and 27,416 shares of restricted stock to Fiona, with an aggregate grant date fair value of approximately $2.2 million. The audit committee found that the prior descriptions of this agreement with Fiona did not accurately reflect its purpose. And Stern “potentially usurped a corporate opportunity from us in connection with his indirect sale of these warrants in August 2008,” according to the filing.

Source: Pharmalot


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