The Securities and Exchange Commission is accusing a New Hampshire priest and hedge fund manager of threatening a witness and leaking confidential documents to a journalist as their ongoing court battle continues.
In September 2018, the SEC filed suit against the Rev. Emmanuel Lemelson in U.S. District Court for the District of Massachusetts. Lemelson runs Lemelson Capital Management and is also a priest at St. George Greek Orthodox Church in Keene, N.H.
The original suit claims Lemelson and his firm illegally profited from a scheme to drive down the price of San Diego-based Ligand Pharmaceuticals Inc., reaping more than $1.3 million of gains for the advisor and the hedge fund.
The two sides have battled in court ever since, with Lemelson’s lawyer claiming that his client is being singled out by regulators.
“[N]ever before has the Commission brought a short-and-distort case against an individual based on opinion commentary,” wrote Lemelson’s lawyer Douglas Brooks of the Boston firm LibbyHoopes, in a deposition. “This enforcement action represents a brazen attack on, and an unprecedented violation of, [Father] Emmanuel’s free speech rights.”
In a Friday court filing, the SEC shared an email from Brooks to the counsel for the Greek Orthodox Archdioceses of America. In it, Lemelson demands that the chancellor for the Greek Orthodox Metropolis of Boston swear under oath to Lemelson’s version of events, and pay Lemelson $10,000 to cover legal fees.
If the chancellor declined to agree to the terms offered, Lemelson vowed to sue the church, the email said.
A Separate Conflict
Brooks responded by claiming the SEC has never indicated that the chancellor is a witness in its case. Therefore, Lemelson’s interaction with the chancellor represents an attempt to settle a separate dispute “outside of the context of this case.” According to Brooks, Lemelson has called for the chancellor’s ouster and the two have been in a running dispute.
In a Monday court filing, the SEC claimed Lemelson leaked confidential documents to a Barron’s reporter in another attempt to damage Ligand. The Feb. 19 story noted that Ligand urged the SEC to pursue an investigation of Lemelson for years.
According to the SEC, the Barron’s reporter contacted Ligand’s investor relations office on Feb. 11, and the company informed defense counsel of the violation on Feb. 12. The following day, Lemelson covered his short position in Ligand, the SEC said.
“The timing is more than a little suspicious — having been caught in the act of attempting to once again manipulate Ligand’s stock price, Lemelson liquidated his short position before any negative media coverage he prompted was published,” the SEC attorneys wrote.
‘A Gift From God’
Lemelson’s Amvona Fund is a small player in the large hedge fund universe, reporting $35.8 million in assets. Minimum investment for the fund is $500,000. In most recent filings, Lemelson reported a net return of 151% for fund owners, with substantial gains made from short selling.
The Lemelson and his seven-year-old hedge fund have attracted a fair bit of publicity through the years. He told the Wall Street Journal that he’s always been good at predicting the future, calling it “a gift from God.”
The SEC isn’t so sure and began investigating Lemelson, who otherwise operates his fund with lesser scrutiny. Hedge funds with under $150 million in assets are exempt from regular compliance examinations from the SEC.
According to the SEC’s complaint, Ligand’s stock lost more than one-third of its value during the course of Lemelson’s alleged scheme. The complaint charges that after establishing his short position, Lemelson made a series of false statements to shake investor confidence in Ligand, lower its stock price, and increase the value of his position.
Lemelson used written reports, interviews and social media to spread untrue claims, including that Ligand was “teetering on the brink of bankruptcy” and that Ligand’s investor relations firm agreed with his view that its flagship Hepatitis C drug, Promacta, was going to become obsolete, the SEC wrote.
Lemelson also allegedly misled investors by citing a European doctor’s negative views on the same Ligand drug without revealing the doctor was Amvona’s largest investor and had a significant financial interest in seeing Ligand’s stock price decline, court documents say.
The SEC’s complaint charges Lemelson and Lemelson Capital Management with anti-fraud provisions, and seeks to have them return allegedly ill-gotten gains with interest and pay monetary penalties. The complaint names the Amvona Fund as a relief defendant and seeks to have it return gains it obtained as a result of Lemelson and his firm’s alleged misconduct.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at firstname.lastname@example.org. Follow him on Twitter @INNJohnH.
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