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
"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
08831. Jack Hennessy, CEO. 609-860-8088; fax, 609-860-5903 Home
page: www.mwc.com. Also at 241 Forsgate Drive, Jamesburg. 732-656-0200;
7500, Cranbury 08512-7500. Myron Galuskin, president. 609-860-4000;
fax, 609-860-0074. Www.us.rhodia.com
In June the U.S. headquarters for the French manufacturer
closed its site at 231 Blackhorse Lane in North Brunswick and moved
the offices of 56 employees in the accounting, tax, and travel departments
to 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 occupied
two buildings on Blackhorse Lane. Doug Bansbach of Newmark is marketing
the 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 administrative
and R&D functions.
Robbinsville 08691. Joseph Mo, CEO. 609-208-9688; fax, 609-208-1868.
Home page: www.nexmed.com
With a private placement of common stock, the drug developer has grossed
$10.5 million from 12 investors, including the Tail Wind Fund, MidSummer
Capital, and Viking Global Investors. It sold nearly 3 million shares
at $3.60 per share, and the sale included some warrants that can be
called if the stock rises. The firm develops transdermal drug delivery
technology — Alprox-TD and Femprox creams for ED and female sexual
arousal disorder, respectively.
Suite 3100, CN 5308, Princeton 08543-5308. Michael Becker, CEO. 609-750-8200;
fax, 609-452-2476. Www.cytogen.com
In late June Cytogen Corporation and GE Medical Systems
announced an alliance to market a molecular imaging system for evaluating
the extent and spread of prostate cancer. The two companies will integrate
GE Medical’s Infinia Hawkeyer imaging system with Cytogen’s ProstaScint
Another new partnership announced recently was with Siemens Medical
Solutions and University Hospitals of Cleveland to promote breakthroughs
in prostate cancer imaging. Doctors in Cleveland will use a Siemens
camera in combination with the monoclonal antibody agent ProstaScintr
from Cytogen to pinpoint the exact location of tumors. They are averaging
90 percent accuracy in identifying the tumor location.
Earlier in June Cytogen Corporation had announced it would raise $5
million in a private placement of common stock. Institutional investors
bought the stock at $4.75 and will receive warrants as well. The stock
went up to $8 on Monday, June 30, and this week was trading at above
08619. Dennis M. Marconi Esq., partner. 609-584-1444; fax, 609-584-1555.
Barnaba & Marconi has expanded from 2239 Whitehorse-Mercerville Road
to 315 Lowell Avenue. The firm focuses on personal injury, municipal
court, and real estate.
100, Princeton. 609-452-7300.
Edward M. Bernstein has moved from 721 Alexander Road. The firm focuses
on corporate and tax law and commercial litigation.
08520. 609-371-5600; fax, 609-371-5611.
Lance D. Brown moved from Maple Shade earlier this year.
Suite 103, Robbinsville 08691. 609-689-3939; fax, 609-689-3402.
Laurence A. Hecker has an office in Robbinsville. The group focuses
on collections and plans to expand the staff size later this year.
1 AAA Drive, Suite 101, CN 4853, Robbinsville 08691. 609-587-6888;
Michael B. Kaplan has moved his law office from Englewood to Robbinsville.
The group focuses on bankruptcy litigation.
Princeton School of Engineering.
he consulted to Trinity Counseling Service and Family and Children’s
Service of Central Jersey.
he co-founded what is now the Princeton Symphony Orchestra.
with the NJ Department of Environmental Protection.
Rialto’s Barber Shop on Nassau Street and Princeton Barber Shop.
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