Positron downplays lawsuit
By Carole Carlson and Michael Gonzalez For the Post-Tribune August 4, 2012 6:32PM
This facility at 15th Avenue and Texas Street in Gary could become the new facility for Positron. | Jeffrey D. Nicholls~Sun-Times Media
An excerpt from the U.S. Securities and Exchange Commission’s lawsuit
“Positron has never been profitable, and had an accumulated deficit of $102.3 million as of December 31, 2010. During the time of the Solaris Fund’s investments, Positron reported significant losses — a $3.8 million net loss in 2005, a $6.6 million net loss in 2006, a $7.8 million net loss in 2007, and an $8.9 million net loss in 2008. Beginning with the audit for year end Dec. 31, 2004, Positron’s auditor has expressed substantial doubt as to Positron’s ability to continue as a going concern, and opined that the company needed to increase its system sales or obtain additional capital in order to be profitable ... Positron was almost always in need of cash. In 2008, Positron was in precarious financial condition and could not pay off its debts.”
Read the full complaint at http://www.sec.gov/litigation/complaints/2011/comp22167.pdf
Updated: September 6, 2012 6:14AM
GARY — The CEO of a nuclear medicine company that’s brokered big incentives to build a $65 million facility in the city says he hopes it can break ground within six months.
That same CEO, however, is in the thick of a federal lawsuit alleging he defrauded a hedge fund he managed to prop up the company coming to Gary.
On Friday, Patrick Rooney, the CEO of Positron Corp., downplayed the U.S. Securities and Exchange Commission lawsuit and said he needs to raise more capital to build the Gary facility.
“Later this year, we’ll have firm deadlines,” he said.
The Fishers, Ind.-based company, originally planned to build a $55 million facility in Noblesville, just northeast of Indianapolis, but it changed plans last month when the Gary deal surfaced.
Rooney said Positron plans to build the first commercial cyclotron in the U.S.
Positron’s proposed Gary facility, near 15th Avenue and Texas Street, would make radioactive medical imaging isotopes that can be used to identify medical anomalies, like cancer, in the body.
“We chose Gary for its location, proximity to Chicago, airports, Purdue, IU, Argonne and Fermilab in Illinois,” said Rooney, who said Positron’s corporate headquarters is in Westmont, Ill., a Chicago suburb.
“We needed greater incentives, and Gary has been terrific to work with. They’re transitioning to new and improved and so are we.”
Closing the deal
To land the deal, the city offered $15 million in tax increment financing bonds through the Redevelopment Commission and assistance landing New Market Tax Credits to cover $15 million of the development. It awaits approval from the City Council.
New Market Tax Credits is a 12-year-old federal program to boost investments in poorer communities by encouraging banks, financial institutions and community development agencies to funnel tax breaks to businesses looking to locate in their areas.
Mayor Karen Freeman-Wilson said the city was aware of the federal lawsuit.
“We were aware of the SEC allegation again Positron. We understand it’s just that. Any time someone is accused of something they have right to defend themselves,” she said.
Freeman-Wilson said the city did its due diligence and was satisfied that the SEC investigation doesn’t impact the Positron proposal in Gary.
Freeman-Wilson has said publicly the Positron project fits into the city’s focus on “meds and eds,” or increasing medical and educational development in Gary.
Positron has promised Gary — a city in serious need of as many economic development wins as possible — the project will include 100 to 150 construction jobs and dozens of production, shipping and receiving and security jobs along with at least 50 positions for highly skilled workers.
SEC suit looming
CEO since 2009, Rooney has been successful in getting headlines for his project, but he’s had less success in staying out of the federal government’s crosshairs.
Last November, the SEC sued Rooney for allegedly defrauding investors in Solaris Opportunity Fund, a hedge fund Rooney managed, of more than $3.6 million.
The complaint was one in a batch of legal actions the SEC took across the country.
Federal officials claimed Rooney and Solaris management used the fund as “a piggy bank” when no other funds were available to finance Positron, where Rooney served as chairman since 2004.
The SEC suit said Rooney failed to tell Solaris investors how their money was being used. Rooney allegedly led Solaris investors to believe their money was going into a diversified fund, according to the SEC.
In its complaint, the SEC alleged Solaris Fund owned more than 60 percent of Positron shares, which recently traded at 1 cent each. The lawsuit alleges Rooney hid the Positron investment and his affiliation with Positron from Solaris fund investors for four years until March 2009.
The SEC says it documented $3.2 million in loans from the Solaris Fund to Positron. As part its relief, the government is asking a judge to bar Rooney from serving as an officer or director of a public company. The next hearing on the case is Aug. 15 in U.S. District Court in Chicago.
Rooney said he expects a swift resolution to the SEC lawsuit that he maintains has nothing to do with Positron.
“The SEC is a civil matter, I disagree it’s a conflict. The claim is I invested too much in Positron. I invested in a company that I later joined. They say it’s a conflict issue.”
Rooney said the fraud allegation shouldn’t hamper Positron’s investment outlook. “Anytime the SEC acronym is used, it’s a major concern, but we’ve brought a diamond in the rough to be a true diamond,” he said referring to Positron. Rooney said the SEC case would be resolved soon, and the Gary project would move forward.
Positron posted revenue of $6.2 million last year, but its stock hovered at about 1 cent a share. “I always want it to be worth more, the industry has been very fragmented,” Rooney said.
The move to Gary where operations will be consolidated from Lubbock, Texas, will make the difference for the company, Rooney said.
For about two years, Positron operated a two-person Crown Point radiopharmaceutical manufacturing facility, used in nuclear medicine to diagnose disease. A company news release mentioned the Crown Point operation but the building at 1195 Arrowhead Court is vacant. Rooney said it left that operation recently when it completed the purchase of Manhattan Isotopes in Lubbock in January.
“Crown Point was a stepping stone and quite frankly, it was the step to our facility in Lubbock, Texas,” Rooney said. He said the Lubbock facility will eventually be consolidated into Gary. “We’re building autonomy, once that’s understood, revenues will grow ... We’re still a developing company.”