4 Years in Prison for David Blech

The high-profile backer of several Israeli biotech companies has been sentenced to four years in prison for stock fraud. David 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. The two companies involved were Haifa-based stem-cell developer Pluristem and Intellect Neurosciences, founded by Daniel Chain on the basis of Alzheimer’s drug technology developed by Chain during his tenure at Jerusalem’s Mindset Pharmaceuticals. Neither company’s management was in any way implicated in the schemes.

In the 1990’s Blech was enormously successful as one of the largest early investors in the US biotech industry and was the founder of almost 30 companies, including the now defunct Rehovot-based Peptor whose technology for a diabetes therapy is now undergoing Phase III trials by Andromeda of the Clal Biotechnology group. But in 1998 Blech’s career came to a screeching halt when he was convicted of defrauding nine broker-dealers and Bear Stearns & Co., his firm’s clearing broker, of $16 million. Blech got five years’ probation, instead of a possible prison sentence of more than eight years, because the judge took into consideration his gambling addiction and diagnosed bipolar condition.

Judge Colleen McMahon this time was less forgiving. “I’m afraid that you had all the mercy that you’re going to get,” she told Blech at his sentencing. “Now is the time for punishment, which you didn’t get last time.”

In addition to the prison sentence, McMahon ordered Blech to serve three years of supervised release and to forfeit $1.3 million.