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Biopure Corporation’s recent settlement with the Securities and Exchange Commission didn’t cost it a cent, but GC Jane Kober wasn’t so lucky. The SEC hit her with a $40,000 penalty for her role in allegedly misrepresenting news about one of Biopure’s drugs. Experts say that the SEC’s action shows that it continues to be serious about going after “gatekeepers” � corporate advisers who, in the agency’s eyes, have a heightened responsibility to prevent wrongdoing. A Cambridge, Massachusetts � based biotechnology company, Biopure got into trouble over a blood substitute called Hemopure that it was developing. The SEC alleges that in 2003, Biopure received increasingly bad news from the Food and Drug Administration about the approval prospects for Hemopure. Biopure failed to adequately disclose the info from the FDA, the SEC claims, and instead issued misleadingly upbeat press releases ["False Positive," April]. The SEC reached final settlements with Biopure and Kober in early September. The company and the GC did not admit or deny the claims against them, and both agreed to injunctions against future violations of securities laws. Biopure will also have to hire an independent consultant to conduct a thorough review of its compliance procedures. While no financial penalties were levied against Biopure, Kober wasn’t as fortunate. She can at least take comfort in knowing that she’s not the only executive who had to write a check to the government. In April the SEC assessed a $40,000 penalty against Carl Rausch, a former senior technology officer at Biopure and vice-chairman of its board. The SEC’s cases against former CEO Thomas Moore and former VP Howard Richman are continuing. Biopure did not return calls for comment, but in a statement, current CEO and chairman Zafiris Zafirelis said that the settlement “removes a cloud over the company.” Kober also did not return calls for comment. David Bergers, district administrator of the SEC’s Boston office, says that gatekeepers � including general counsel � will be held responsible for incomplete disclosures. “The commission will continue to focus on misleading disclosures in the biotechnology industry and other industries to ensure that investors receive accurate info,” Bergers says. A spokesman with the SEC in Washington, D.C., says that the agency brought more than two dozen enforcement actions against attorneys in the fiscal year that ended in September 2005. According to William Schuman, a partner at McDermott Will & Emery, the current mind-set at government enforcement agencies is that GCs need to protect the shareholders’ best interests, not just do the management team’s bidding. “The days when in-house lawyers were thought of [as] scriveners are over,” says Schuman, who is not involved in the Biopure case. The changing role of corporate legal chiefs means that they often have to play the heavy to highly optimistic business leaders, says RoseAnn Rotandaro, a former legal chief at two high-tech companies who is now an attorney at Armor Legal Counsel in Palo Alto. Insisting on disclosure of potential problems can be a challenge when everyone else is eagerly pushing a product, Rotandaro says. “At times you have to really kind of help people understand why you’re always the bad-news person. You have to be strong and stubborn and not be afraid to be in people’s faces.” Lee Braem says that if it’s not enough of an incentive to worry about your company, then worry about yourself. According to Braem, the president-elect of the New Jersey Corporate Counsel Association, “It’s not just your company at stake, it’s your reputation at stake.”

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