Hedge funds destroyed a company trying to cure cancer – chapter  8

Hedge funds destroyed a company trying to cure cancer – chapter 8

This is Chapter 8 of a 15 chapter series. The entire series is listed here

Adam Kidan was named as a suspect in the murder of Gus Boulis and was questioned, but never
charged. Instead, he went to jail for his dealings with Jack Abramoff, the disgraced Washington lobbyist.
Moscatiello, the alleged Mafia bookkeeper, was charged with the murder. When he was released on
parole, he disappeared. Lately, he has been featured on the popular television program, “America’s Most
Barberich, chairman of Versicor, said he hardly knew Moscatiello or Kidan, and only got involved as the
chief financier of their casino because he’d seen an advertisement in a newspaper. Meanwhile, Jeremy
Goldberg left Versicor and “founded” ProQuest Investments, Michael Milken’s vehicle for investing in
companies that supposedly have treatments for prostate cancer.
Milken is barred from the securities industry, so even though he seems to have been largely responsible
for building ProQuest, it is not surprising that he does not appear on ProQuest’s website. Goldberg’s

name isn’t listed either. And there are a few other names that disappeared from the website after people
began investigating ProQuest.
Among the missing are the names of the people who sit on ProQuest’s advisory board of directors.
Thankfully, we have screenshots of the fund’s website, taken prior to the whitewashing.
The screenshots show that at the time that Dendreon was getting mauled in 2007, ProQuest’s advisory
board included the following: Jonathan Simons, president and CEO of Milken’s Prostate Cancer
Foundation; Howard Soule, executive vice president of Milken’s Prostate Cancer Foundation; Stuart
Holden, medical director of Milken’s Prostate Cancer Foundation; William G. Nelson, a doctor who sits on
the “Therapeutic Consortium” of Milken’s Prostate Cancer Foundation; James Blair, manager of ProQuest
affiliate Domain Associates and a board member of Milken’s Prostate Cancer Foundation; David B. Agus,
a doctor with Milken’s Prostate Cancer Foundation; and, finally, a doctor (I’ll introduce him shortly) who
was the chairman of the “Therapeutic Consortium” of Michael Milken’s Prostate Cancer Foundation.
In other words, ProQuest Investments, which is Milken’s investment fund (though Milken doesn’t tell
people that), enjoys remarkable overlap with Milken’s “philanthropic” outfit, the Prostate Cancer
Which raises a question: What does the Prostate Cancer Foundation do with the money that it solicits
from generous people — not just wealthy donors but also average folks who want to fight cancer and
donate what they can?
I do not mean to be dismissive of a philanthropy. I am sure there are well-meaning people who work at
the Prostate Cancer Foundation. It has served as a forum for many of the world’s leading doctors to
exchange information, and it has raised awareness of a terrible disease. All philanthropy, one can argue,
is good. And since Milken himself is a prostate cancer survivor, one is inclined to believe that his interest
in battling the disease is genuine.
But that might be to underestimate Milken’s love of “the game” — his desire to be a player in the world. It
might also be to underestimate the particular world that Milken inhabits. It is a world of people who desire
money, yes, but who perhaps desire in greater measure both stature and influence. For stature and
influence blind the public and soothe the conscience.
If you are a miscreant, to play “the game” is fun. To play the game and cheat is more fun still. But it is
perhaps also as simple as this: the miscreant desires to feel no shame. He wants to be able to say to
himself: “I am important. I am prominent. I have the approval of others.”
Certainly, Milken has used his “philanthropy” to ingratiate himself with the establishment and the public at
large. He is one of the few convicted criminals who has ever returned to “prominence.” So, it seems, he
has gotten one over on us. He has won. But “the game” is never over. And in the view of Deep Capture,
winning perhaps matters more to Milken than battling the disease that once afflicted him.
Yes, it’s all about “the game.”
This might explain why Milken’s “philanthropic” outfit snubbed its nose at Dendreon, a company that did
not have a cure for prostate cancer, but did boast the most promising new treatment available—a
treatment that could have been safely administered to patients right away. This might explain why
Milken’s Prostate Cancer Foundation instead supported Novacea, a company whose controlling
shareholders were Milken’s ProQuest Investments and its affiliate. As we will see, Novacea’s treatment
was more likely to kill patients than save them, but that does not matter when it’s all about winning “the

To win the game, of course, one must have allies — preferably miscreants who know a good scheme
when they see it. Perhaps that is why Perceptive Advisors, which is an affiliate of Milken crony Lindsay
Rosenwald’s biotech empire, invested a large sum in Milken’s Novacea while serving as one of the seven
Milken-network hedge funds that bet big against Dendreon.
As you will recall, Perceptive Advisors didn’t just bet big, it also pounded Dendreon by exercising call
options, flooding the market with millions upon millions of Dendreon shares. Simultaneously, Milken crony
Steve Cohen, whose former top trader was a vice president of Lindsay Rosenwald’s Paramount Capital,
flooded the market with at least 1.6 million Dendreon shares.
But it’s not just about winning the game. It’s about the exhilaration of pushing the limits. It’s about being
brazen – brazen to the extreme; brazen to the point of lunacy – and seeing if you can (ha! ha! ha!) get
away with it.
Perhaps that is why Milken’s Prostate Cancer Foundation went to extraordinary lengths (delivering
money, organizing conferences, dispatching prominent doctors) to promote a mostly untested prostate
cancer treatment – a treatment (Abiraterone) that was ostensibly being developed by Cougar
Biotechnology, the company that was controlled until recently by the above-mentioned Lindsay
Rosenwald, who is not only the son-in-law of the “king of stock fraud,” but also a former vice chairman of
D.H. Blair – a firm whose president was Michael Milken’s former national sales manager; a firm that was
tied to the Mafia and indicted on 173 counts of securities fraud; a firm that was best known for
fraudulently pumping and dumping biotech companies that had no real medicine whatsoever.
Yes, it’s all about “the game.”
Perhaps this also explains the strange occurrences that began in the Spring of 2007.

In the weeks after the FDA’s advisory panel meeting on March 29, 2007, there were only three financial
analysts on the planet who were giving a “sell” rating to Dendreon’s stock.
The first two you have already met. One was the song-singing Sendek of Lazard research, the outfit run
by the former head of research at a subsidiary of TheStreet.com, which was co-founded by Milken crony
Marty Peretz, short selling hedge funds, and Jim Cramer, the former hedge fund manager turned
The second was Jonathan Aschoff, the doctor-impersonating fraud who used to work for Sturza’s
Institutional Research, a firm that specialized in publishing biased, negative financial research on biotech
companies for a network of short sellers that included the likes of Jim Chanos (Sturza’s current employer)
and Michael Steinhardt (mentor to Chanos; son of the “biggest Mafia fence in America”; partner of Milken
co-conspirator Ivan Boesky; and incubator of Jim Cramer’s hedge fund).
The third financial analyst who was bashing Dendreon in the spring of 2007 was Maged Shenouda of
UBS, the investment bank. Shenouda’s arguments against Dendreon matched almost precisely those of
Aschoff and the singing Sendek, both of whom we have shown to be part of the Milken network. So it is
probably significant that Shenouda’s boss, the president of UBS investment banking, was (until March
2007) Ken Moelis, who had once been a trader for Michael Milken’s operation at Drexel, Burnham,
Lambert. Indeed, Moelis had been one of Milken’s most trusted and favored employees.
While this protégé of Milken was president of UBS, the company became one of the most crooked banks
in the world. According to the Department of Justice, for example, UBS “systematically and deliberately”
violated U.S. law by recruiting Americans looking to evade taxes. But, of course, it was not ordinary

Americans who hid their money at UBS. It was only the wealthiest of people, including hedge fund
managers, who stashed billions upon billions of dollars in secret accounts at UBS, while perhaps taking
advantage of the bank’s other “services” as well.
Was one those “services” illegal naked short selling? In 2006, the Louisiana attorney general filed court
documents to compel UBS to hand over records that would help answer that question. Specifically, the
attorney general suspected that UBS had, along with Refco, processed phantom stock for Rhino
Advisors, the hedge fund whose manager became a fugitive from U.S. law, living in Austria, his money
undoubtedly stashed in secret bank accounts, after his “unbridled” criminal naked short selling destroyed
companies that had been hobbled by fraudulent “death spiral” PIPEs deals, many of which were brokered
by Milken crony Carl Icahn’s Ladenburg Thalmann.
In March of 2007, when Dendreon’s prostate cancer treatment appeared to be on the fast track to FDA
approval, and a UBS research analyst was trashing Dendreon, another interesting event was unfolding.
Specifically, Mitchel Guttenberg, who had sat on an elite 12-member committee that signed off on the
contents of UBS’s financial research, had just been arrested by the FBI.
Prior to joining UBS, Guttenberg had not had a distinguished career. He started out in Wisconsin, where
regulators determined that he was trading without a proper license. Later, he worked at a second-tier
bank called First Albany and put in time at Axiom Capital, a firm that was once censured by the NASD for
publishing false financial research on biotech companies. (More recently, one of Axiom’s brokers was
charged with systematically defrauding mentally handicapped elderly people).
Moelis, the Milken protégé who was president of UBS, stacked the bank with his cronies, many of them
former Milken employees, and had a propensity for hiring and promoting people who were a bit rough
around the edges. For example, it would have been Moelis who promoted Guttenberg to the elite
committee that signed off of UBS’s financial research.
Soon after joining UBS’s financial research committee, according to the DOJ, Guttenberg began illegally
providing inside information about the contents of soon-to-be released UBS research reports to a circle of
hedge fund managers and traders. Two of the traders who profited from Guttenberg’s tips worked for a
hedge fund called Chelsey Capital. Previously, the SEC had investigated Chelsey Capital and a hedge
fund called GLG Partners for paying investment banks bribes (in the form of preposterously large
commissions) in exchange for privileged access to initial public offerings.
It is clear that GLG Partners (and perhaps, by extension, also Chelsey Capital) is a member of the
network of hedge funds that is the subject of this story. Thanks to a lawsuit that Canadian insurer Fairfax
Financial filed against SAC Capital (run by Milken crony Steve Cohen); Kynikos Associates (run by the
above-mentioned Jim Chanos), and other hedge funds in their network, Deep Capture has acquired
copies of emails that Jim Chanos sent to GLG Partners. While it is difficult to tell from these emails
whether GLG participated in the network’s attack on Fairfax, Chanos certainly communicated with GLG
about the status of that attack.
In March, 2007, when Mitchel Guttenberg (the member of UBS’s elite 12-member financial research
committee) was arrested, the SEC stated that Guttenberg was at the center of “one of the most pervasive
insider trading rings since the days of [Milken co-conspirator] Ivan Boesky….” A few days later, Moelis,
the Milken protege, resigned from UBS to start his own investment bank.
A few months after that, French authorities busted another UBS insider trading ring, this one including
UBS subsidiary UBS O’Conner; the above-mentioned GLG Partners; and a hedge fund called Meditor
Capital. At the time, one of Meditor’s top traders was Andrew Billet, formerly of SAC Capital ( the hedge
fund run by Milken crony Steve Cohen, who was one of the seven “colorful” traders who held large
numbers of put options in Dendreon).

This connection would not be worth mentioning except for the fact that Steve Cohen is known to include
his former employees in his nationwide trading network, and in 2007, Meditor’s trading tended to run
parallel to that of Cohen’s hedge funds. Indeed, Meditor’s biggest share purchases were in biotech
companies – Onyx Pharmaceuticals, Vion Pharmaceuticals, Atherogenics, and Cypress Bioscience — that
were also targeted by Cohen’s SAC Capital.
Moreover, in April, 2007, right before some strange occurrences were to derail Dendreon, Meditor
purchased 1.6 million shares in Novacea, the company whose controlling shareholders (Michael Milken’s
ProQuest and Domain Associates) must have known, for reasons that I will describe, that they would
make money on their investment in Novacea only in the event that Dendreon’s treatment for prostate
cancer failed to go to market.
Aside from Meditor Capital, there was, in the spring of 2007, only one other hedge fund that made a
major investment in Milken’s Novacea – a company whose prostate cancer treatment, we will see, had no
chance of reaching patients anytime soon. The second hedge fund was Perceptive Advisors, managed by
an employee of Paramount Capital, whose vice president was formerly one of Steve Cohen’s top traders.
Perceptive Advisors, we know, was one of the seven “colorful” hedge funds that held large numbers of
put options in Dendreon. And Paramount Capital was owned by Lindsay Rosenwald, the Milken crony
who controlled Cougar Biotechnology, another Dendreon “competitor” that (with support from Milken’s
Prostate Cancer Foundation) claimed to have a treatment for prostate cancer, though that treatment had
almost no data showing that it could be safely administered to patients.
So we can begin to see a pattern – a pattern that is all the more interesting when you consider the
strange occurrences that began in April 2007.

I will get to those strange occurrences in a moment. But first let’s learn a bit more about that first UBS
insider trading ring — the one that was busted in March 2007, when a UBS researcher was bashing
In addition to the Chelsey traders, the ring included two other miscreants – David Glass and David Tavdy,
both of whom received advance notice of the contents of UBS’s financial research. Tavdy, described as a
“scrappy” Russian immigrant, was a close friend and former First Albany co-worker of Mitchel Guttenberg,
the fellow who was a member of UBS’s elite financial research committee. Tavdy earned a fortune from
his trading, but apparently unsatisfied, he had painted on his expensive, high-speed motor boat the name,
“Enough is Never Enough.”
Glass had previously spent most of his career at Sterling Foster, which was one of the first brokerages
shut down by the FBI when the bureau began its crackdown on Wall Street outfits believed to be tied to
the Mafia. Glass quit his job at Sterling Foster right before the FBI raided the firm and arrested 20 of its
brokers. Later, Glass helped a close friend write the script for “Boiler Room,” the successful movie about
a brokerage that specialized in ripping off investors.
Glass was the first one busted for his role in the UBS insider trading ring. The FBI promptly strapped him
with a wire and dispatched him to record a conversation with a Wall Street player named Larry McKeever,
who had said that he was going to expose the UBS insider trading ring to the authorities unless Glass
paid him a large sum of money.
In the course of this conversation, Glass mentioned Tavdy and Tavdy’s close friend, Mitchel Guttenberg,
whom Milken crony Ken Moelis had promoted to UBS’s financial research committee, putting him in a
position to illegally disclose the contents of upcoming UBS research reports.

Specifically, Glass told McKeever that the attempted bribe wasn’t a good idea because Guttenberg and
Tavdy might find out about it. Glass was especially careful to warn McKeever about Tavdy. As Glass put
it, Tavdy “probably knows the name of Larry McKeever.”
In response, McKeever said of Tavdy: “Listen, Glass, I kid you not—he’s a dead man. I don’t give
a if he’s tied into the Russian mob or whatever. I’ll find that , mark my words. My lips to
your ears. He don’t know my name.”
At this point, McKeever appeared to have had second thoughts about issuing threats to Tavdy, a guy who
might be tied to the Russian mob.
McKeever nervously added, “How does he know my name?”

In March 2007, after the FDA advisory panel voted in favor of Provenge, the singing Sendek, the doctorimpersonating Aschoff, and the fellow from UBS’s troubled research shop were the only three financial
analysts in the world who were dismissive of Dendreon’s prospects. But it is interesting to see what a
determined public relations campaign can accomplish.
Dendreon’s treatment was the first-ever vaccine for cancer. It was the first-ever promising substitute for
the ravages of chemo. And it was the first-ever cancer therapy that could target and boost the immune
system. Although the data suggested that it did not prevent the inevitable end in some patients, but
merely forestalled it, the treatment was truly revolutionary and seemed to have the potential to save a lot
of people. So one might have expected some media excitement.
But Dendreon was a small company that did not understand how “the game” worked. The whispering
hedge funds, along with their proxies — the song-singing, doctor-impersonating analysts – were more
sophisticated. So the press reports on Dendreon were few in number. And most of them featured Sendek,
Aschoff, or the UBS fellow voicing their party line that Provenge was “dangerous” – that the data was
insufficient, that there were better drugs in the pipeline. And as the days went by we heard more and
more about this strange notion that the Provenge advisory panel had asked the “wrong question” – that
the FDA might have to “change the question.”
Dendreon’s enemies repeated their “talking points.” They stayed “on message.” They manufactured the
news, and the news was that the FDA just might reject Dendreon’s application. It went unmentioned that
the FDA had never in history rejected a drug for dying patients after its expert advisory panel had voted
for approval.
But despite the weird news reports, Dendreon’s stock price continued to soar.
And so, the hedge funds continued to pile on. Call options (such as those exercised by the abovementioned Perceptive Advisors) were exercised in mass. And millions upon millions of phantom shares
continued to flood the market. By April 10, Forbes magazine was reporting that Dendreon, a company
that then had a market cap of just under $2 billion, had become one of the top three most heavily traded
stocks on Wall Street – beating out Microsoft, Cisco, and Seagate Technologies.
On April 12, Jim Cramer tried to explain away the increase in the stock price. He told CNBC’s audience
that they were witnessing a short “squeeze,” – the stock price was soaring as short sellers scrambled to
buy shares to cover their positions. Cramer added that he was aware of one hedge fund manager who
had failed to buy counterbalancing call options at an effective strike price. This was probably a reference
to Edelman at Perceptive Advisors. In any case, Cramer seemed to be saying that it was just a matter of
time before the stock price would crash again.

Cramer was right about that. But there was no short “squeeze” – the short sellers were not covering their
positions. To the contrary, they were growing their positions — exponentially. On April 4, 2007, around 3
million Dendreon shares were sold short. The next day, the number of shares sold short quadrupled – to
13 million. And more than 10 million shares were sold short every day leading up to April 12.
It is a safe bet that these short sellers knew that something was going to crack Dendreon’s stock price.
And sure enough, on April 13, Dendreon witnessed the first of some singularly strange occurrences, to
which we may, at last, turn.

Late that day – April 13 – a newsletter called The Cancer Letter published a presumably confidential letter
that Dr. Howard Scher of the Memorial Sloan-Kettering Cancer Center had written to the Food and Drug
Administration. Dr. Scher was one of the 17 doctors who had sat on the FDA’s advisory panel, and his
letter — which was addressed to an FDA deputy commissioner and cc’d to then FDA Commissioner
Andrew von Eschenbach and an FDA official named Richard Pazdur – argued vehemently that
Dendreon’s prostate cancer treatment should not be approved.
This was strange for numerous reasons. For one, it was unprecedented for a doctor to lobby the FDA
after an advisory panel had already voted on a treatment. Doctors who are contracted by the FDA to
judge a treatment for a life threatening disease voice their opinions during the advisory panel meeting. At
the end of the meeting, they are invited to vote on two questions: Is the treatment safe? And, is there
“substantial evidence” that the treatment might improve the health of patients? The vote is considered
final. When it’s done, the doctors are expected (as we will see) to go home and keep their opinions to
When Dendreon supporters and prostate cancer advocacy groups–including Care-To-Live, a heroic
organization that has done much to publicize Dendreon’s travails–saw Dr. Scher’s letter, they asked
Francesco Marincola, a doctor who had sat on the Provenge advisory panel, to write his own letter in
Dendreon’s defense. Dr. Marincola declined. He said, “As you may well infer…I share many of your
opinions. However, I strongly believe that my role as a member of the advisory board is to express my
opinion during the meeting [and that] it would be ill advised to influence the FDA decision beyond that
Dr. Marincola added: “If it is true (which I doubt) that some other member of the board contacted the FDA
afterwards, it is beyond my control. But my personal opinion is that my credibility as a member of the
board will be better preserved if I give my impartial opinion at the time of the meeting and let the FDA do
their work afterwards.”
This, said Dr. Marincola, was a matter of preserving the “integrity of the process.”

The second thing strange about Dr. Scher’s missive is that, within days, it ended up in the hands of The
Cancer Letter, a publication whose subscribers include a significant number of Wall Street investors. FDA
employees are forbidden to discuss the merits of medical products in public, and one big reason is that
news of such discussions can profoundly affect stock prices.
The publication of Dr. Scher’s letter was reminiscent of an event that had made The Cancer Letter
famous in the world of biotech – an event that had established The Cancer Letter’s reputation as an
organ of short selling hedge funds. That event was the FDA’s 2001 decision to deny approval of a cancer
drug that had been developed by a biotech company called ImClone.

News of the ImClone decision was made public not by the FDA. Somebody had inside information that
the FDA was going to reject ImClone’s cancer treatment, and that somebody leaked the information to
The Cancer Letter, which published it with great fanfare. In the days prior to the publication, short selling
in ImClone increased dramatically. Meanwhile, ImClone executives and their friends offloaded their
One of those friends was Martha Stewart, who was then known for her all-American, home lifestyle
products. Stewart was accused of trading on her inside information about the FDA’s ImClone decision.
Ultimately, she went to jail for obstructing the DOJ’s investigation into her actions.
Others were more fortunate. A Congressional investigation into the ImClone affair produced phone
records that showed who had called ImClone in the days before the FDA’s decision was made public by
The Cancer Letter. These records show that on December 27, 2001, ImClone received phone calls from
three hedge fund managers. Presumably, these three hedge fund managers had gotten wind of the
imminent story in The Cancer Letter, and were calling to discuss.
It should surprise nobody that these hedge fund managers were all members of a particularly colorful
Wall Street network. One of the three hedge funds that called ImClone that day was Ziff Brothers
Investments. That, remember, is the fund that incubated the trading empire of Jim Chanos, who is now
under investigation for trading ahead of reports issued by financial research firm Morgan Keegan. Dirk
Ziff, as you will recall, was introduced to Chanos by Michael Steinhardt (Milken crony; Boesky partner;
son of “the biggest Mafia fence in America”) and by Ziff’s Harvard Professor, Marty Peretz (Steinhardt
partner; Boesky crony; Milken pal).
The second hedge fund that called ImClone that day was SAC Capital, run by Steve Cohen, the Milken
crony who is “the most powerful trader on the Street.” As you will recall, Cohen is a Chanos collaborator
(both received and communicated about advanced copies of the same Morgan Keegan reports, and they
have frequently employed the same tactics, and the same thugs, to attack the same companies). As you
will also recall, previously Cohen was the top earner at Gruntal & Company, a Mafia-linked brokerage that
owed its existence to Milken’s junk bond finance. While there, he was reportedly investigated for trading
on inside information provided to him by Milken’s people at Drexel Burnham Lambert.
The third fund manager who called ImClone that day was Carl Icahn, the Milken crony who founded the
options department at the Mafia-linked Gruntal & Company before becoming a billionaire by brokering
“death spiral” PIPEs financing in cahoots with criminal naked short sellers, and by blackmailing
companies with finance from Milken and the Mafia-connected Zev Wolfson.
The Congressional investigation notwithstnding, it is difficult to know whether these three fund managers
acted on the secret ImClone information that The Cancer Letter made public soon after they called
ImClone. We don’t know because the SEC does not require hedge funds to disclose their short positions,
as they do their long holdings.
Short positions are, after all, a big secret.

We do know that in the days leading up to The Cancer Letter’s publication of Dr. Scher’s letter, short
selling of Dendreon’s stock increased dramatically. Indeed, as mentioned, short selling of Dendreon
quadrupled on April 5, the day before Dr. Scher emailed his confidential letter to the FDA.
At the same time, criminal naked short sellers churned out more phantom stock. SEC data shows that at
least 9 million shares “failed to deliver” on April 10. Since “failures to deliver” are recorded three days after
the phantom stock was sold, this means that massive amounts of naked short selling occurred on April 5.
On each day leading up to April 13, the day that Dr. Scher’s missive was published in The Cancer Letter,

between 9 million and 12 million phantom shares “failed to deliver”. On April 10, Dendreon’s stock was
trading at its high of around $25. By April 12, the day before The Cancer Letter’s “scoop,” the stock had
already nosedived to around $18.
This trading was strange. And as mentioned, Dr. Scher’s letter was strange.
It wasn’t just that Dr. Scher’s lobbying of the FDA was unprecedented and an affront to the “integrity” of
the drug approval process. And it was not just that his letter to the FDA quickly appeared in The Cancer
Letter (just as The Cancer letter had made public the FDA’s decision about ImClone). And it was not just
that short selling hedge funds clearly knew that Dr. Scher’s letter was in the works.
It was that Dr. Scher’s letter precisely echoed the party line that had been put out by the whispering
hedge funds, the song-singing Sendek, the UBS researcher, and the doctor-impersonating Jonathan
Like the Wall Street analysts, Dr. Scher said that Provenge had failed to meet its “primary end-points in
two clinical trials” — that the data was not absolute “proof” that Provenge worked. And just as Aschoff had
told journalists that it would be “dangerous” to approve Dendreon, Dr. Scher argued that the FDA would
be somehow setting a dangerous precedent by approving a new standard of treatment.
Dr. Scher’s letter was also reminiscent of that Dendreon conference call, when the singing Sendek asked,
over and over, whether the advisory panel had asked the “right question” and whether the FDA might
have to “change the question.” Now Dr. Scher, too, was suggesting that the advisory panel had somehow
been a sham – that it had “changed the question” regarding the efficacy of Provenge. Since the panel had
voted on the wrong “question,” Scher argued, the panel’s overwhelming endorsement of Provenge should
be disregarded.
It seemed that Dr. Scher, who is one of the most prominent cancer doctors in America, was parroting the
medical wisdom of Wall Street goons. Either that, or the goons were parroting Dr. Scher. Whichever the
case, and whatever their motivations, Wall Street miscreants and a prominent FDA-contracted doctor
were now working in parallel to quash a promising treatment for prostate cancer.

Here’s another factoid about Michael Milken’s ProQuest Investments. As I mentioned, ProQuest
whitewashed its website, so that it no longer identifies the directors of its advisory board. Screenshots
from the past allowed me, in a previous section of this story, to tell you who most of those directors were
as of Spring, 2007. But there is one ProQuest Investments director whom I have not yet identified by
This ProQuest Investments director is a doctor. And his name is Howard Scher.
That is correct: Dr. Howard Scher, who sat on the advisory panel that voted on the merits of Dendreon’s
prostate cancer treatment, and then trashed Dendreon’s treatment in a letter to the FDA (an
unprecedented lobbying effort after an advisory panel had voted), was also a director of Michael Milken’s
ProQuest Investments. In fact, Dr. Scher was not just a director of ProQuest, he was also an executive of
the fund, which likely means he stood to profit from its investments.

(l to r) Dr. David Solit, Tommy Lasorda,
Dr. Howard Soule, Dr. Howard Scher and
Michael Milken
Dr. Scher was, moreover, the chairman of the “Therapeutic
Consortium” at Michael Milken’s Prostate Cancer
Foundation. He also received unknown amounts of money
as the lead investigator of Asentar, the prostate cancer
treatment that was being developed by Novacea, whose
controlling investors were Milken’s ProQuest Investments
and its affiliate, Domain Associates. Meanwhile, Dr. Scher
was a paid member of the advisory board of Cougar
Biotechnology, the Dendreon competitor that was
controlled by Milken crony Lindsay Rosenwald, formerly of
the Mafia-connected pump-and-dump stock fraud shop
D.H. Blair.
It is bad enough that the world’s foremost financial criminal,
Michael Milken, stood to profit from the demise of a
promising prostate cancer treatment. It is disconcerting to
know that Lindsay Rosenwald, a Mafia-connected Milken-crony with a record of destroying real
companies and creating fake companies, is among the biggest biotech players in the nation – a player
who controls 8% of the world’s pharmaceutical firms. It is unsettling to know that this Milken crony and
those seven Milken-network hedge funds with large numbers of put options were intent on seeing
Dendreon fail.
But somehow, the saddest news of all is that Dr. Scher took unprecedented steps to derail a competing
treatment that could have extended the lives of a great many men. Dr. Scher is one of the most prominent
physicians in America. He is considered one of the world’s foremost experts on prostate cancer. His
opinions matter. His advice is heeded. It is likely that at some point Dr. Scher believed that other
treatments were superior to Dendreon’s, but somewhere along the line, he seems, at least to some
extent, to have let his motives become mixed in with his incentives.
Given his deep connections to Milken’s ProQuest Investments, to Novacea (the company controlled by
ProQuest and an affiliate) and to Dendreon’s other competitors (such as Cougar Biotechnology), Dr.
Scher probably should not have sat on the FDA advisory panel that voted on whether Dendreon should
be approved. He certainly should not have been lobbying the FDA. He should not have trashed
Dendreon’s treatment, for as he must have known, due to these other relationships, he could no longer
claim to be an objective observer.
He had what they call…well, in more innocent times, they called it a “conflict of interest”

Maybe we should not be too hard on Dr. Scher. I am reminded of a story that I once reported for Time
Magazine in Asia, about a network of Mafia-connected stock brokerages that had set up shop in
Bangkok, Thailand in order to avoid the FBI “Mob on Wall Street” crackdown that had led to Operation
Uptick in 2000. The owners of the brokerages were bad guys (there was a point where they nearly began
murdering each other in the streets of Bangkok), but they had become quite prominent in some business
circles. They were also generous “philanthropists.”
The bad guys gave especially large sums of money to a priest who was famous for the wonderful work he
had done to help people in Bangkok’s most dire slums. The priest was, of course, grateful for the
contributions, and he used every opportunity to speak highly of his benefactors. Even when the bad guys
were charged with crimes – even when they became fugitives from the law – the priest spoke quite
strongly in their defense. He simply refused to acknowledge that the criminals were anything other than
“prominent” businessmen and “prominent” philanthropists.

The priest was not a bad man. He was as good as they come. But he had received so much money – and
he had deployed this money to so much good purpose – that he was inclined to continue working with the
The famous priest should have condemned the miscreants. He was an important voice of moral authority.
But by the wonders of human psychology, he believed, quite genuinely, that the criminals had done no
wrong. We call this phenomenon “deep capture.” The priest had been “captured” by the criminals. His
judgment was clouded.
Perhaps Dr. Scher was a priest of the medical community. Michael Milken’s Prostate Cancer Foundation
had donated tens of millions of dollars to Dr. Scher’s hospital, Memorial Sloan-Kettering (a hospital, it
should be noted, by way of disclosure, that has also received significant donations from the family of
Deep Capture reporter Patrick Byrne, whose cancer was successfully treated there). With support from
the Prostate Cancer Foundation, Dr. Scher and Memorial Sloan have been able to continue their
research into experimental treatments that perhaps will one day help patients.
No doubt, Dr. Scher was grateful for this generosity. No doubt, he was earnest about his Milken-financed
investigations and believed that he was contributing to the advancement of science. Meanwhile, Milken
and his foundation had become quite “prominent” players in the fight against prostate cancer. Indeed, it is
fair to say that Milken, more than anyone, had come to dominate the prostate cancer establishment.
Nobody had more influence. So, in Dr. Scher’s view, it perhaps made perfect sense to collaborate with
this criminal. As his collaboration grew, he perhaps became inextricably tied to the work – not just
financially, but also emotionally.
The phenomenon of “deep capture” is indeed pervasive. And it is pervasive because it can swallow
anyone – even those with the best of intentions.
That said, Dr. Scher’s letter to the FDA was not merely the work of an earnest but “captured” physician.
As we will see, it was conniving. It trashed Dendreon in a manner that was patently dishonest, and
exaggerated the promise of a treatment (the one under development at Milken’s Novacea) that would
soon be shown to be ineffective.
Unwittingly or not, Dr. Scher aided the machinations of the criminal Michael Milken. And as we will see,
there are good reasons to suspect that those machinations were not about philanthropy or fighting
cancer, or even about investing in companies that had genuine value.
The machinations were about destroying a good company so that Milken and a network of hedge funds
could make a big bundle of money.