Case 1:12-cv-12334-IT Document 191 Filed 01/30/15 Page 1 of 9

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS
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Plaintiff,
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v.
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SPENCER PHARMACEUTICAL INC., et al.,
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Defendants.
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___________________________________________ )
SECURITIES AND EXCHANGE COMMISSION,

Case No. 1:12-cv-12334-IT

PLAINTIFFS OFFER-OF-PROOF ADDENDUM

TO PLAINTIFFS COMBINED MOTION FOR
DEFAULT JUDGMENTS, REMEDIES, AND SANCTIONS
Pursuant to the Courts invitation at the motion hearing held on January 16, 2015,
plaintiff Securities and Exchange Commission (the Commission) hereby submits the
following offer-of-proof addendum to plaintiffs combined motion for default judgments,
remedies, and sanctions [Dkt. # 181]. The following offer of proof provides a summary of the
evidence the Commission would have offered at trial in support of its allegations against
defendant Jean-Franois Amyot. If Amyot had not defaulted on the morning of trial by failing
to appear, the Commission contends that the evidence of liability offered by the Commission
would have far exceeded the preponderance of the evidence standard, thereby resulting in a
jury finding of liability against Amyot on all counts.
Given that the Court is familiar with the factual allegations in this matter, the
Commission will summarize them only briefly here. In short, the Commissions complaint
alleges that Amyot, in 2010 and early 2011, orchestrated a scheme to pump up the share
price of the penny-stock company Spencer Pharmaceutical Inc. (Spencer) through false and
misleading press releases and promotional materials, and then reaped millions of dollars in

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unjust gains in two funds he controlled by dumping Spencer shares at inflated prices.
Among the false and misleading information disseminated at Amyots direction was the claim
that in November 2010 Spencer received an unsolicited $245 million buyout offer from a
Kuwaiti company called Al-Dora Holdings (Al-Dora). No such legitimate offer was made,
and no such entity formally existed. In addition to violating certain antifraud provisions of the
federal securities laws as a result, the Commission alleged that Amyot also violated certain
registration provisions of the federal securities laws when he orchestrated the sale of 12
million purportedly unrestricted Spencer shares into funds he controlled, before later selling
them to unsuspecting investors as part of his dump of Spencer shares.
In the parties Joint Pretrial Memorandum [Dkt. #122], the Commission identified ten
specific factual issues in dispute for resolution at trial. The Commission summarizes below
the evidence it would have offered on each of the specific factual issues in dispute.
1.

Whether the press releases issued by Spencer and Hail First between June 2010

and March 2011 were false and misleading because, inter alia, they publicized a $245 million
buyout offer for Spencer that was not legitimate;
a. To establish that the press releases were false and misleading, the Commission
would have offered, among other evidence: deposition testimony of Hussain AlAwaid, the purported CEO of Al-Dora, who testified, among other things, that
Al-Dora was never an established company and that he was never its CEO; the
testimony of Maximilien Arella and Ian Morrice, Spencers then CEO and
Executive Vice President, respectively, who would have testified, among other
things, about their inability to obtain concrete evidence of Al-Doras existence;
deposition testimony of Amyot, who testified that he and not Al-Dora
provided (via his company Hilbroy Advisory) the supposed $500,000 deposit to

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Spencer on behalf of Al-Dora; and documents purporting to be correspondence

from Al-Dora and an agreement with Al-Dora that lacked any indicia of
reliability (e.g., Trial Exhibits 32, 97, 99, 116 [Dkt. # 145 (Joint Exhibit List)].
The Commission would have also identified for the jury the lack of any evidence
offered by Amyot to establish the existence of Al-Dora or the legitimacy of the
buyout offer, as well as the fact that the supposed buyout offer made absolutely
no business sense given Spencers lack of any revenues, income, significant
assets, or business prospects.1
2.

Whether Amyot directed and orchestrated a scheme involving Spencer (including

its officers and directors), Hilbroy, IAB, Al-Dora, Hail First, and several additional third parties
to mislead investors about whether Spencer had received a legitimate $245 million buyout offer;
a. To establish that Amyot was the individual directing and orchestrating the
scheme, the Commission would have offered, among other evidence: testimony
of Arella and Morrice about, among other things, Amyots central and dominant
role in establishing Spencer, funding Spencer, and controlling Spencers
promotional activities and stock-related activities (including the issuance of
stock); deposition testimony of Amyot buttressing the testimony of Arella and
Morrice on these same points as well as testimony about Amyots involvement in
orchestrating all aspects of the buyout offers progression on both sides of the
offer; deposition testimony of Rami Ailabouni, an associate of Amyots, who
would have testified, among other things, that he sent, at Amyots direction, draft
correspondence to Al-Awaid for Al-Awaid to sign as supposed evidence of the
purported buyout offer; deposition testimony of Marc Gagnon and Eric Boyd,
1

Amyot did not identify a single document for inclusion on the Joint Exhibit List, nor was he
intending to call any witnesses at trial.

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two associates of Amyots who worked for Hilbroy Advisory, about, among
other things, Amyots practice of promoting companies and profiting from the
subsequent sale of stock in those companies; and numerous emails and other
documents evidencing Amyots central role on both sides of the buyout offer,
including directing Al-Awaid to send certain correspondence to Arella and
engaging a personal friend of his (Amyots) to be the lawyer for Al-Dora and its
purported subsidiary, Hail First Pharma (e.g., Trial Exhibits 35, 178).
3.

Whether the information alleged by the Commission to be false and misleading

was material, or in other words, whether the information was substantially likely to be
considered important to a reasonable investor in deciding whether to invest in Spencer;
a. To establish materiality, the Commission would have introduced, among other
evidence: deposition testimony of Amyot that certain of the information released
in Spencer press releases drafted by Amyot was information Amyot believed to
be material; testimony from investor Dan Wilkerson from Mesquite, Texas, that
he purchased Spencer stock based on the news about the purported buyout offer;
and summary charts and testimony from a Commission accountant reflecting
significant market reactions, both in terms of stock price and volume of shares
traded, following the release of many of the press releases issued during the
relevant timeframe.
4.

Whether Amyot controlled Spencer, Hilbroy, IAB, the Cunningham-Adams Small

Cap Fund I, and the Cunningham-Adams Green Fund during the relevant time period;
a. To establish Amyots control over Spencer, Hilbroy, IAB, and the CunninghamAdams Funds, the Commission would have introduced, among other evidence:
Amyots admissions and stipulations as to his positions of control at Hilbroy and

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IAB and over the Cunningham-Adams Funds; testimony of Arella and Morrice
about, among other things, Amyots central and dominant role in establishing
Spencer, funding Spencer, and controlling Spencers promotional activities and
stock-related activities (including the issuance of stock); deposition testimony of
Marc Gagnon and Eric Boyd about, among other things, Amyots complete
control over Hilbroy and IAB; account opening documents reflecting that Amyot
was the President of the Cunningham-Adams funds (Trial Exhibits 9, 210); and
numerous emails and other documents reflecting Amyots day-to-day control
over each of the entities, including, for example, emails indicating that Amyot at
one point fired Arella as the CEO of Spencer and directed how Spencer should
respond to requests by shareholders that the restrictive legends on their share
certificates be removed (e.g., Trial Exhibits 26, 93-95).
5.

Whether Amyot had ultimate authority over the press releases issued by Spencer

and Hail First alleged by the Commission to be false and misleading;

a. To establish that Amyot had ultimate authority over the press releases issued by
Spencer and Hail First, the Commission would have introduced, among other
evidence: testimony of Arella and Morrice that Amyot drafted nearly all of the
key press releases concerning the buyout offer, overruled Arella when Arella
requested that certain edits be made, and directed when and how the press
releases would be released; and numerous emails reflecting that Amyot drafted
and directed the release of both Spencers and Hail Firsts press releases and
conceived of Spencers press release plans (e.g., Trial Exhibits 147, 154, 284,
309).

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6.

Whether Amyot acted with scienter;

a. To establish Amyots scienter, the Commission would have introduced, among
other evidence: testimony of Arella and Morrice and deposition testimony of
Gagnon and Boyd about, among other things, each of the points outlined above;
deposition testimony of Amyot and Ailabouni about, among other things,
Amyots efforts to identify a supposed buyer for Spencer from the Middle East
prior to the initial overture Spencer received; numerous emails and other
documents indicating that Amyot intended to promote Spencer with false and
misleading information for the purpose of profiting from the sale of shares at
inflated prices, including a May 2009 email in which Amyot wrote (about
Spencer and other companies) We have undertaken several transactions and
putting lipstick on the pig will require everyones hand in the pie, especially if
you expect to get part of the pie come trading bonus day (e.g., Trial Exhibit 8);
and an email from Amyot sent two weeks before Spencer was first contacted
about a purported buyout in which Amyot told his broker in the Bahamas that
Spencer has a potential offer on the table for an all out acquisition (Trial
Exhibit 179).

7.

Whether Spencer ever registered any shares with the Commission;

a. To establish that Spencer never registered any shares with the Commission, the
Commission would have offered, among other evidence, an official attestation of
non-existence of registration statements for Spencer from the Commission (Trial
Exhibit 318).

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8.

Whether any Spencer shares owned or controlled by Amyot met the factual

predicate to establish an exception to the registration requirements of the Securities Act of 1933;
a. To establish that several million of the shares Amyot controlled and sold did not
meet an exception to the registration requirements of the Securities Act of 1933,
the Commission would have introduced, among other evidence: deposition
testimony of Donna Levy, a staff member in the Commissions Division of
Corporation Finance, and Diane Dalmy, an attorney engaged by Amyot to author
a so-called Rule 144 Opinion Letter to enable the sale of certain Spencer shares,
about, among other things, the circumstances under which an exception is
available and the information Dalmy relied upon to author and execute her
opinion letter; the underlying documents that purportedly support an exception
but which are on their face fraudulent and backdated (e.g., Trial Exhibit 15); and
testimony of Arella and deposition testimony of Sylvain Amyot, Jean-Francois
Amyots brother, that support that the underlying documents are fraudulent and
backdated.
9.

Whether Amyot orchestrated the movement and sale of Spencer shares from

Spencer to an entity called Finkelstein Capital, then to an entity called Swissquote Bank, and
ultimately to the Cunningham-Adams Small Cap Fund I, which sold them into the market;
a. To establish that Amyot orchestrated the movement and sale of Spencer shares
through the above-named entities, the Commission would have introduced,
among other evidence: deposition testimony of Morrice about, among other
things, Amyots directions to Morrice that Morrice draft and send certain
correspondence authorizing the movement of shares; and various emails from
Amyot and others, correspondence, and brokerage statements that reflect the

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movement and sale of the shares at Amyots direction (e.g., Trial Exhibits 15-19,
324-26).
10.

The quantity of shares sold by the Cunningham-Adams funds during the relevant

time period and the proceeds from such sales.

a.

To establish the quantity of shares sold and the proceeds from those sales, the
Commission would have introduced, among other evidence, the brokerage
statements for the Cunningham-Adams Funds, emails from Amyot directing that
Spencer shares in the funds be sold, and summary charts and testimony from a
Commission accountant establishing the quantity of shares sold, timing of the
sales, and proceeds from the sales (e.g., Trial Exhibits 293, 324-27).

Taken together, the Commission believes that the evidence it would have introduced at
trial, as summarized above, would have far exceeded the preponderance of the evidence
standard, thereby establishing Amyots liability on all counts.
Respectfully submitted,
/s/ James R. Drabick
Rua M. Kelly (Mass. Bar No. 643351)
James R. Drabick (Mass. Bar No. 667460)
Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
33 Arch Street, 23rd Floor
Boston, MA 02110
(617) 573-4535 (Drabick direct)
(617) 573-4590 (fax)
drabickj@sec.gov (Kelly email)
Dated: January 30, 2015

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CERTIFICATE OF SERVICE
I, James R. Drabick, certify that on January 30, 2015, the foregoing addendum was
filed electronically with the Court and were served upon Jean-Franois Amyot by electronic
means.
/s/ James R. Drabick
James R. Drabick