Corrections or additions?
This article by Barbara Fox was prepared for the July 9, 2003 issue of U.S. 1 Newspaper. All rights reserved.
Medical World Communications Pays $3.7 Million
Faced with a potential penalty of many millions of
dollars, Medical World Communications (MWC), the Cranbury-based publisher
of medical journals that was accused of filing fraudulent postal documents,
has settled the charges for $3.7 million.
The charges were based on postal rules: Magazines sent free to people
who have requested them pay 30 to 40 percent less postage than magazines
sent by cheaper bulk rate.
Medical World claims that the $3.7 million damage represents payment
of back postage. But Michael A. Chagares, assistant U.S. Attorney
and chief of the civil division in Newark, says the sum “is significantly
more than the actual damages to the government.”
Medical World had claimed that, for a six-year period, 11 of its several
dozen magazines were being requested by more than 50 percent of the
recipients. The federal government — informed by a whistle blower
— claimed that Medical World had falsified hundreds of those records,
and that this resulted in underpayment of $2 million to the United
States Postal Service. The government threatened to levy a penalty
of from $5,000 to $10,000 on each record, in addition to triple damages
on the $2 million in postage fees (U.S. 1, January 8).
The suit was filed in 1999, under the whistle blower provision of
the False Claims Act, by Peter F. Sprague, who had been fired after
three years as the company’s COO. Sprague said that the fraud scheme
continued despite his attempts to enlist his superiors to stop the
fraud.
“This is our first case involving the 50 percent response requirement
for bulk mail. And now this issue is on our radar screen,” says Chagares.
He points out that the USPS runs like a private entity but is still
a governmental agency. “To the extent the postal service is defrauded
we would invoke the False Claims Act.”
John J. “Jack” Hennessy, founder and CEO of MWC, has said
that the problems stemmed from an accounting error brought on by recent
acquisitions of magazines with sloppy accounting practices.
Curtis Pickelle, MWC’s California-based president, acknowledges that
because advertising rates are cheaper for bulk-rate publications and
more expensive for magazines with a high requestor level, some advertisers
could have been paying higher rates than were justified. With regard
to potentially angry advertisers, Pickelle says, “We did get some
initial concern from advertisers, but I was gratified that they recognized
the problem did not reflect the circulation they were currently buying
or would buy in the future. I met one on one — and in small groups
— with our clients and was forthright with them about the situation
we found ourselves in. They understood that they would benefit if
our company continued to thrive.”
Hennessy, a 1978 graduate of the University of South Carolina, and
has had a medical publishing business since 1985. His father was also
in the business. In 1993 he reconfigured his business with majority
investment from Boston-based Media/Communications Partners, began
buying other allied health magazines, and is now one of the largest
allied health publishers.
The case was handled in Trenton in U.S. District Court by Judge Garrett
E. Brown Jr. Medical World was represented by Samuel P. Moulthrop
of Riker Danzig et al in Morristown. Sprague’s attorney, Cherry Hill-based
Nicholas C. Harbist, has said that Sprague could potentially get 15
to 25 percent of the damages, but Chagares, the federal attorney,
says the amount has not been determined.
— Barbara Fox
Medical World Communications, 8 Center Drive, Jamesburg08831. Jack Hennessy, CEO. 609-860-8088; fax, 609-860-5903 Homepage: www.mwc.com. Also at 241 Forsgate Drive, Jamesburg. 732-656-0200;fax, 732-656-0818.Top Of PageDownsizing: RhodiaRhodia Inc. (RHA), 259 Prospect Plains Road, CN7500, Cranbury 08512-7500. Myron Galuskin, president. 609-860-4000;fax, 609-860-0074. Www.us.rhodia.comIn June the U.S. headquarters for the French manufacturerclosed its site at 231 Blackhorse Lane in North Brunswick and movedthe offices of 56 employees in the accounting, tax, and travel departmentsto its headquarters campus in Cranbury. A business unit, Ecoservices,also made the move.”The chemical industry has been in a slump,” says David Klucsik,director of communications for Rhodia North America.In 1990, when the company was known as Rhone-Poulenc, it occupiedtwo buildings on Blackhorse Lane. Doug Bansbach of Newmark is marketingthe 30,000-foot property.The Rhodia Group, based in Paris, has 24,000 employees in 130 countries.The Cranbury campus, with 750 employees in 13 buildings, houses administrativeand R&D functions.Top Of PageStock NewsNexMed (USA) Inc. (NEXM), 350 Corporate Boulevard,Robbinsville 08691. Joseph Mo, CEO. 609-208-9688; fax, 609-208-1868.Home page: www.nexmed.comWith a private placement of common stock, the drug developer has grossed$10.5 million from 12 investors, including the Tail Wind Fund, MidSummerCapital, and Viking Global Investors. It sold nearly 3 million sharesat $3.60 per share, and the sale included some warrants that can becalled if the stock rises. The firm develops transdermal drug deliverytechnology — Alprox-TD and Femprox creams for ED and female sexualarousal disorder, respectively.Cytogen Corporation (CYTO), 650 College Road East,Suite 3100, CN 5308, Princeton 08543-5308. Michael Becker, CEO. 609-750-8200;fax, 609-452-2476. Www.cytogen.comIn late June Cytogen Corporation and GE Medical Systemsannounced an alliance to market a molecular imaging system for evaluatingthe extent and spread of prostate cancer. The two companies will integrateGE Medical’s Infinia Hawkeyer imaging system with Cytogen’s ProstaScintimaging agent.Another new partnership announced recently was with Siemens MedicalSolutions and University Hospitals of Cleveland to promote breakthroughsin prostate cancer imaging. Doctors in Cleveland will use a Siemenscamera in combination with the monoclonal antibody agent ProstaScintrfrom Cytogen to pinpoint the exact location of tumors. They are averaging90 percent accuracy in identifying the tumor location.Earlier in June Cytogen Corporation had announced it would raise $5million in a private placement of common stock. Institutional investorsbought the stock at $4.75 and will receive warrants as well. The stockwent up to $8 on Monday, June 30, and this week was trading at above$10.Top Of PageLegal MovesBarnaba & Marconi LLP, 315 Lowell Avenue, Hamilton08619. Dennis M. Marconi Esq., partner. 609-584-1444; fax, 609-584-1555.Barnaba & Marconi has expanded from 2239 Whitehorse-Mercerville Roadto 315 Lowell Avenue. The firm focuses on personal injury, municipalcourt, and real estate.Edward M. Bernstein, 731 Alexander Road, Suite100, Princeton. 609-452-7300.Edward M. Bernstein has moved from 721 Alexander Road. The firm focuseson corporate and tax law and commercial litigation.Lance D. Brown Esquire, 375 Route 130, Hightstown08520. 609-371-5600; fax, 609-371-5611.Lance D. Brown moved from Maple Shade earlier this year.Laurence A. Hecker Attorney-at-Law, 1 AAA Drive,Suite 103, Robbinsville 08691. 609-689-3939; fax, 609-689-3402.Laurence A. Hecker has an office in Robbinsville. The group focuseson collections and plans to expand the staff size later this year.Michael B. Kaplan, Standing Chapter 13 Trustee,1 AAA Drive, Suite 101, CN 4853, Robbinsville 08691. 609-587-6888;fax, 609-587-9676.Michael B. Kaplan has moved his law office from Englewood to Robbinsville.The group focuses on bankruptcy litigation.Top Of Page“>DeathsDavid J. Feehan , 50, on June 27. He was employed by thePrinceton School of Engineering.William A. Phillips MD , 81, on June 30. A psychiatrist,he consulted to Trinity Counseling Service and Family and Children’sService of Central Jersey.Nathaniel Burt , 89, on July 1. A composer, poet, and author,he co-founded what is now the Princeton Symphony Orchestra.Thomas Frederick Breden , 47, on July 1. He was a supervisorwith the NJ Department of Environmental Protection.Ettore Cifelli , 63, on July 3. A barber, he worked atRialto’s Barber Shop on Nassau Street and Princeton Barber Shop.Next StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
