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Securities and Exchange Commission v. Spencer Pharmaceutical Inc.

United States District Court, D. Massachusetts

November 14, 2014


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[Copyrighted Material Omitted]

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For Securities and Exchange Commission, Plaintiff: Amy Gwiazda, LEAD ATTORNEY, Rua M. Kelly, United States Securities and Exchange Commission, Boston, MA; James R. Drabick, Securities and Exchange Commission - MA, Boston, MA; Franklin C. Huntington, IV, Securities and Exchange Commission, Boston, MA.

Jean-Francois Amyot, Defendant, Pro se, Quebec CANADA.

Maximilien Arella, Defendant, Pro se, Laval, QC.

Ian Morrice, Defendant, Pro se, Nepean, ON.

IAB Media Inc., Pro se.

Hilbroy Advisory Inc., Defendant, Pro se.

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Indira Talwani, United States District Judge.

I. Introduction

This case involves allegations that Defendant Jean-Francois Amyot (" Amyot" ), a Canadian national, violated U.S. securities law. On May 15, 2013, Amyot filed a Motion to Dismiss the Complaint for Lack of Jurisdiction [#18], alleging that the federal court in Massachusetts lacked personal jurisdiction over him to adjudicate the case. After full briefing, the court denied the motion without prejudice to reconsideration. See Electronic Clerk's Notes [#47]. On October 22, 2014, the court notified the parties that it would review the jurisdictional question prior to the commencement of trial, which is scheduled for November 17, 2014. In addition to considering the original papers filed in support of or in opposition to the motion, the court allowed the parties to file supplemental materials in support of their respective arguments. u Electronic Clerk's Notes [#138]. Amyot informed the court on October 22, 2014, that he would not file a supplement, but would rest on his original papers. Plaintiff SEC filed supplemental materials on October 27, 2014. See Supplement Pl.'s Opp'n Def.'s Mot. Dismiss Lack Personal Jurisdiction [#135] [hereinafter Pl.'s Supplement].

II. Allegations and Proffered Evidence Relating to Jurisdiction

Plaintiff SEC alleges that Amyot engaged in a scheme to artificially inflate the stock price of Defendant Spencer Pharmaceutical, Inc. (" Spencer" ) before " dumping" the stock into the market for a gross gain of approximately $5.8 million dollars. Compl. ¶ ¶ 1-3. Plaintiff SEC brings claims against Amyot for violations of the Securities Act of 1933 and the Exchange Act of 1934. See id. ¶ 4.

A. Amyot's Involvement with Spencer

In February 2008, Amyot incorporated Wolverine Oil and Gas Corp. in Nevada and named himself director. See id. ¶ 17; Def.'s Answer ¶ 17 [#48]. On May 27, 2009, Amyot filed an amendment renaming Wolverine Oil and Gas Corp. as Spencer. See Compl. ¶ 18; Def.'s Answer ¶ 18. In July 2009, Spencer entered into a reverse merger with a Delaware Corporation, Emergensys, which then adopted the name Spencer. See Compl. ¶ 19; Def.'s Answer ¶ 19. Amyot had previously served as president of Emergensys, and he became a

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vice president of the newly formed Spencer. See Compl. ¶ ¶ 16, 21; Def.'s Answer ¶ ¶ 16, 21.

The complaint alleges that in August 2009 Amyot created the appearance that Spencer was headquartered in Boston, Massachusetts by setting up a " virtual office." See Compl. ¶ ¶ 7, 10, 40; see also Pl.'s Substituted Combined Opp'n Mots. Dismiss Filed Defs. Jean-Francois Amyot, IAB Media Inc., & Hilbroy Advisory Inc., Ex. 1 [#34] [hereinafter Pl.'s Opp'n]. Amyot entered into a contract for the creation of this office and coordinated the payment of fees for its setup. See Pl.'s Supplement at Ex. 3. Spencer had no physical presence in Massachusetts, and all mail received at its Boston address was forwarded to Defendant Hilbroy Advisory, Inc (" Hilbroy" ), a public relations firm allegedly controlled by Amyot. See Pl.'s Opp'n at Ex. 1; Compl. ¶ ¶ 15, 40-41. In November 2009, Amyot officially resigned from his position as vice president of Spencer; he was replaced by Defendants Ian Morrice and Max Arella. See Compl. ¶ ¶ 21-22; Def.'s Answer ¶ ¶ 21-22. Even after Amyot resigned, Plaintiff SEC alleges that he maintained control of Spencer's operations and provided all of Spencer's funding. See Compl. ¶ 23; Pl.'s Opp'n at Ex. 5 (deposition testimony of Defendant Max Arella that all of Spencer's funding came from Amyot); Pl.'s Supplement at Ex. 7 (letter dated November 12, 2010, and signed by Amyot as vice president of Spencer).

B. The Spencer Press Releases

From August 2010 through April 2011, Spencer issued a number of press releases that were published nationwide by a news outlet called MarketWire.[1] See id. ¶ ¶ 44-76; Pl.'s Supplement at Ex. 8. These press releases were drafted by Hilbroy and sent for release by Amyot. Pl.'s Supplement at Ex. 8; Compl. ¶ 41.

The complaint alleges that each of these press releases included false and misleading information about Spencer's operations and assets. See Compl. ¶ ¶ 44-76. The press releases were labeled as originating from " Boston, MA" and indicated that Spencer was a " US-based" pharmaceutical company. See Pl.'s Opp'n at Ex. 4; Pl.'s Supplement at Ex. 8. Beginning in November 2010, the subject of these press releases was an alleged $245 million buyout of Spencer by a foreign company, identified as Kuwaiti-based Al-Dora Holdings. See Compl. ¶ ¶ 51-76. No buyout ever occurred, and a press release issued in October 2011 stated that negotiations had ceased. See id. at ¶ 76. The complaint alleges that all information regarding this buyout was falsified in order to deceive market participants about the value of Spencer's stock. See id. According to the complaint, the ...

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