David Blech Gets Four Years for Manipulating Stock Prices

David Blech, the former biotechnology stock promoter who got probation for a 1998 fraud conviction, was sentenced to four years in prison for a similar crime by a judge who angrily rejected his plea for leniency.

“I’m afraid that you had all the mercy that you’re going to get,” U.S. District Judge Colleen McMahon in Manhattan told Blech today. “Now is the time for punishment, which you didn’t get last time.”

Blech, 57, pleaded guilty last year to separate schemes, in 2007 and 2008, in which he tried to pump up the price of shares in two biotechnology companies, Pluristem Therapeutics Inc. (PSTI) and Intellect Neurosciences Inc. (ILNS), by trading in his own account and those of friends and family, according to court papers. Prosecutors called the trades “a fraudulent scheme to manipulate the market” by enticing other investors to purchase the securities and raise their prices.

“I am ashamed to be again standing before a court and pleading for mercy,” Blech told McMahon today. “I am profoundly sorry.”

In addition to the prison sentence, McMahon ordered Blech to serve three years of supervised release and to forfeit $1.3 million. McMahon said she will recommend he serve the time in the federal medical prison in Massachusetts where convicted inside trader Raj Rajaratnam is jailed.

‘Fragile Family’

McMahon rejected pleas by Blech’s lawyer, Roland Riopelle, to sentence him to a non-jail sentence, based on Blech’s gambling addiction, bipolar disease and what Blech called his “fragile family,” which includes an autistic son.

“The only thing that interests me about Mr. Blech is what he did,” McMahon told Riopelle. “He manipulated the price of a stock and he did it for the third and fourth times -- that we know about.”

In 1999, U.S. District Judge Kevin Duffy sentenced Blech to five years’ probation, instead of a possible prison sentence of more than eight years, for defrauding nine broker-dealers and Bear Stearns & Co., his firm’s clearing broker, of $16 million.

At the time, Blech pleaded guilty to tricking Bear Stearns in 1994 into thinking he was selling securities to lower the credit margin of his firm, D. Blech & Co., by trading them to accounts under his control. He also admitted a separate scheme, committed while he was cooperating with the government, of using accounts in the names of family, friends and business associates to manipulate the price of stocks, according to prosecutors.

Given a Break

“I am going to give you the break,” Duffy told Blech at the time, citing his mental illness and the help he gave prosecutors in unraveling the fraud.

McMahon repeatedly remarked on Blech’s return to court today for sentencing on a similar crime. She told Blech she didn’t intend a sentence of probation.

“Judge Duffy got talked into that and you threw it in his face,” McMahon said before sentencing Blech. “You’re not going to throw it in mine.”

The case is U.S. v. Blech, 12-00372, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in Manhattan federal court at rvanvoris@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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