U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 24008 / December 13, 2017
Securities and Exchange Commission v. H. Craig Dees, No. 17-cv-532 (E.D. Tenn. Dec. 12, 2017)
SEC Charges CEO of Biopharmaceutical Company With Fraud Related to Executive Perks
Company and CFO Also Charged
The Securities and Exchange Commission has charged the former CEO of a biopharmaceutical company with fraudulently obtaining millions of dollars in perks from the company.
According to the SEC’s complaint, filed in federal district court in Knoxville, Tennessee, while Dr. H. Craig Dees was Provectus’ CEO, he treated the company “as his personal piggy bank.” According to the complaint, Dees submitted hundreds of falsified records to Provectus to obtain $3.2 million in cash advances and reimbursements for business travel he never took. Instead, he concealed the perks and used cash advances to pay for personal expenses such as cosmetic surgery for female friends, restaurant tips, and personal travel.
The SEC’s complaint alleges that Dees violated Section 17(a) of the Securities Act and Sections 10(b), 13(b)(5) and 14(a) of the Exchange Act and Rules 10b-5, 13a-14, 13b2-1, 13b2-2, 14a-3 and 14a-9; and aided and abetted Provectus’ violations of Sections 13(a), 13(b)(2)(A) and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 14a-3 and 14a-9 thereunder. The SEC seeks permanent injunctions, disgorgement plus interest, civil penalties, and an officer-and-director bar.
Provectus and its former CFO, Peter R. Culpepper, consented to separate SEC orders, without admitting or denying the SEC’s findings. According to the SEC, Tennessee-based Provectus lacked sufficient controls surrounding the reporting and disclosure of travel and entertainment expenses submitted by its executives. The order further finds that Provectus’ former CEO, Dees, obtained millions of dollars from the company using limited, fabricated, or non-existent expense documentation, and that these unauthorized perks and benefits were not disclosed to investors. Provectus’ former CFO, Culpepper, also allegedly obtained $199,194 in unauthorized and undisclosed perks and benefits. Provectus and Culpepper each agreed to cease-and-desist orders, and Culpepper agreed to pay $152,376 in disgorgement and interest, a civil penalty, and to be suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies. The SEC’s order permits Culpepper to apply for reinstatement after three years. The SEC considered Provectus’ internal investigation regarding Dees and Culpepper, firing of Culpepper, cooperation in the staff’s investigation, as well as its implementation of new controls around reimbursement of travel and entertainment expenses, in determining to accept Provectus’ offer.
The SEC’s investigation was conducted by Brittany Hamelers, Christina McGill, Paul Harley, and Allen Genaldi, and supervised by Timothy N. England and Melissa R. Hodgman.The SEC’s litigation against Dees will be led by Nicholas A. Pilgrim.
https://www.sec.gov/litigation/litreleases/2017/lr24008.htm