Betting On A Fall

Lesley Stahl On One Company's Lawsuit Against A Hedge Fund

(CBS) 
In its defense, Camelback had already written a negative report on Biovail that pre-dates this alleged conspiracy. Camelback told 60 Minutes: everything in our reports was true; we and no one else wrote those reports; "nothing we did was illegal."

SAC says that in 2003 Biovail’s stock was overvalued.

"What do you say to people who say that Biovail was overvalued and that the hedge funds actually performed a service here in pointing this out?" Stahl asked Melnyk.

"I don’t think there was any service that was performed here—I can tell you that. I think—," he said.

Asked if Biovail was overvalued, Melnyk said, "There is virtually no analyst out there that thought that the stock was overvalued."

Well, no one considered it a blue chip stock; some analysts thought it was risky; and Melnyk has been accused of just trying to silence his critics. Several Wall Street investors call CEOs like Melnyk “cry babies” for suing when their stock goes down. And it is true that this is not Melnyk’s first lawsuit. Ten years ago, he sued another hedge fund, accusing it of spreading rumors about his stock in order to sell it short.

"The point is that you sue," Stahl said.

"Oh," Melnyk said.

"This is what you do," Stahl said.

"No, that’s just not right," Melnyk replied. "We don’t sue just for the purpose of suing somebody. This is something that was carefully thought through, was very well researched, was extremely well lawyered. I can’t wait for our day in court."

The Camelback insiders 60 Minutes spoke to are all cooperating with Biovail in its lawsuit. None of them still works for the company.

"Each of us was released by the company," Anifantis said.

Asked if he means fired, Anifantis said yes.

Camelback says their former employees are quote: “lying” and “disgruntled,” that Demitri and Bob were fired because of unethical conduct; Darryl for poor performance; Mark was laid off; but they say they were let go after they complained to their bosses about the company’s practices.

Connecticut Attorney General Richard Blumenthal has begun an investigation not of this case, but of hedge funds in general. He thinks it’s time to start regulating that industry, to start trimming the hedges.


"Joe Mainstreet can be impacted by hedge funds as never before. They control more money, they have more power. They’re the elephant in the room that is unacknowledged a lot of the time," says Blumenthal. "But they can hold huge market sway and that’s the reason why we need to know more about ‘em, and I’m investigating so that hopefully there is more disclosure and transparency."

The hedge fund SAC denies all the charges in Biovail's lawsuit and says that the decline in the company's stock was due to earnings shortfalls and investigations by authorities, including the Securities and Exchange Commission, "not any conspiracy."

It's worth noting that Camelback, which is now called Gradient, has been sued by another company with charges that parallel the Biovail case.