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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, Jamesburg

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;

fax, 732-656-0818.

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Downsizing: Rhodia

Rhodia Inc. (RHA), 259 Prospect Plains Road, CN

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.

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Stock News

NexMed (USA) Inc. (NEXM), 350 Corporate Boulevard,

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.

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.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

imaging agent.

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

$10.

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Legal Moves

Barnaba & Marconi LLP, 315 Lowell Avenue, Hamilton

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.

Edward M. Bernstein, 731 Alexander Road, Suite

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.

Lance D. Brown Esquire, 375 Route 130, Hightstown

08520. 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 focuses

on 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.

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">Deaths

David J. Feehan , 50, on June 27. He was employed by the

Princeton School of Engineering.

William A. Phillips MD , 81, on June 30. A psychiatrist,

he consulted to Trinity Counseling Service and Family and Children’s

Service 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 supervisor

with the NJ Department of Environmental Protection.

Ettore Cifelli , 63, on July 3. A barber, he worked at

Rialto’s Barber Shop on Nassau Street and Princeton Barber Shop.


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