Robert DiCrisci, CEO of the Miami-based pharmaceutical startup NextSource Biotechnology, was roundly criticized all over the world last week after the Wall Street Journal reported that NextSource had bought a 40-year-old brain-cancer drug and raised its maximum price from $50 to $768 per pill.
But while DiCrisci's firm was raising drug prices for people with aggressive brain tumors, a previously unreported lawsuit filed in Miami-Dade County court claims the CEO was having a sexual relationship with one of his assistants, awarding her a huge salary in exchange for "sexual favors," sending at least one other female member of his staff "grossly inappropriate text messages" bragging about his sexual exploits, and subjecting another female employee to "blatant, inappropriate sexual advances and other harassment." He was also accused of charging more than $15,000 in strip-club bills on his company credit card.
The 191-page September lawsuit, filed by two executives who worked alongside DiCrisci managing NextSource's parent company, Tri-Source Pharma, lays out a laundry list of other acts of mismanagement DiCrisci allegedly committed. Among them: engaging in a botched fax-advertising campaign that led to a class-action lawsuit and a $1 million settlement payout, hiding company books from other executives (and using armed guards to allegedly keep people away from company financial records), inflating sales numbers, abusing company credit cards, and "potential investor fraud."
The plaintiffs — DiCrisci's business partners Steven R. Schafer and Christopher Yankana — are suing DiCrisci for breach of fiduciary duty, mismanagement, corporate waste, and fraud. The three founded Tri-Source Pharma (TSP), a parent company that controls a veterinary medicine distributor in Doral called Amatheon, a vet-drug manufacturer called Ivaoes, and NextSource, which makes drugs for people. The lawsuit initially asked a judge to expel DiCrisci from the company.
"For example, he often fails to timely appear for appointments and sometimes fails to appear at all," the suit alleges. "Often, when he has not appeared for appointments, no one is aware of his whereabouts."
Reached by phone,
"These are spurious, false allegations," DeMaria says, "these allegations about a secretary and that he sent inappropriate text messages."
DeMaria also denies that DiCrisci committed any sort of corporate mismanagement or any other sexual impropriety, became an absentee CEO, or wasted any money at NextSource. Instead, he says, the business partners filed an inflammatory lawsuit after they were fired in order to gain leverage on DiCrisci while angling for a buyout.
"To put it nicely, this is a 'negotiating tactic' during a 'corporate divorce,'" DeMaria says. He adds that DiCrisci has "every intention" of buying out his former partners.
NextSource, whose offices are based in Brickell, has become the object of national scorn in recent days. Until the Journal report was published last month, the company was a little-known pharmaceutical startup selling the drug lomustine to people with glioblastoma, the most aggressive form of brain cancer. Since then, political figures and activists, including Vermont Sen. Bernie Sanders, have heaped criticism on the company.
NextSource's decision to raise the price of lomustine has again ignited a national conversation about the regulation of privatized medical and pharmaceutical companies in America.
The United States is virtually the only country on earth that allows pharmaceutical companies to jack up the price of a life-saving cancer drug by 1,400%. This is an outrage. https://t.co/vxwmswwHe3— Bernie Sanders (@SenSanders) December 29, 2017
In response to public acrimony, NextSource has published a statement on its website explaining why it chose to raise the price of lomustine after buying the rights to the drug five years ago. The firm says that the price hike is related to regular production, regulatory, and manufacturing costs and that, even with the increase, lomustine remains the cheapest option for patients with glioblastoma. DeMaria also disputes some of the Journal's mathematics.
But the lawsuit raises added questions about the company's business practices. It begins by outlining DiCrisci's business partners' allegations about his use of company money. According to the lawsuit, DiCrisci charged $13,500 at a New York strip joint; $2,000 at a Miami nude bar; $5,000 at a "longevity and anti-aging" clinic; $2,000 in Hugo Boss clothing; trips to Barcelona, New York, Boston, and other cities; and various other expenses. After Yankana, one of the
In addition, the suit claims that around 2016, the various companies the group owned stopped making payments to vendors; as of the lawsuit's filing, the plaintiffs claim NextSource was either delinquent or had recently been delinquent in payments to "numerous wholesalers" and other suppliers. As of July 2017, the suit says, NextSource owed AmeriSource Bergen, one of the world's largest pharmaceutical companies, $230,000. In the meantime, the suit alleges, DiCrisci flew around the country looking for potential "investors" to inject money into the company. The legal documents allege a series of failed investment plans that never materialized.
We understand that you have questions and concerns amidst recently published media reports. We hear you. Please read our official statement regarding media coverage of Gleostine here: https://t.co/mNyw3nPRCG— NextSource Pharmaceuticals (@NextSourcePh) December 27, 2017
In June 2017, the suit says, DiCrisci began negotiating with an investment bank to sell off company stock. Schafer and Yankana said they weren't pleased with the proposal — and in the midst of the negotiations, DiCrisci fired them July 11, 2017. The suit says their company cell phones and health and life insurance plans were immediately cut off — but both maintain they were fired in clear violation of company rules. (DeMaria says the men were legitimately fired.)
When the two asked to review the company books, they claim, DiCrisci went as far as to hire armed guards to patrol Tri-Source offices. The executives say DiCrisci told employees the guards were there for employee "protection" and to prevent Schafer and Yankana "from entering the building." DeMaria confirms one security guard was hired during the dispute.
The two execs claim DiCrisci was employing a deceptive business practice known as "channel stuffing" (persuading customers to buy more than they immediately need) in order to inflate sales figures. The plaintiffs claim DiCrisci directed Amatheon, Tri-Source's vet-supply company, to buy extra orders of lomustine from its sister company, NextSource, to make NextSource look better. (DiCrisci denies that claim.)
The allegations continue: In 2014, the company began sending unsolicited ads via fax to various vet clinics. But the suit says the unsolicited fax campaign violated portions of the Telephone Consumer Protection Act, and after the company sent out thousands of unsolicited fax ads, a Wisconsin animal clinic filed a class-action lawsuit against Amatheon. The case was settled in May 2017, and Amatheon paid a $1 million settlement. The suit says the company's insurance covered less than half the cost of the payout.
But perhaps the most jarring allegation is that, while DiCrisci was selling drugs to treat cancer patients, he was allegedly having sex with his well-paid assistant and bragging about their exploits to other staff members.
"The ongoing relationship between DiCrisci and the assistant is well-known to company personnel and is the subject of much discussion," the suit reads. "In fact, DiCrisci has publicly and flagrantly boasted to others about his various sexual exploits with the assistant, and has sent grossly inappropriate text-messages to at least one female employee containing explicit and salacious details of his sexual acts with his Assistant, stating, inter alia, 'I penetrated her...', 'I had her swallow...', 'she rubbed...'"
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The suit says that, in return for her "sexual favors," the assistant's salary jumped from $35,000 to more than $108,000 per year. The plaintiffs allege DiCrisci also harassed another female employee.
DeMaria calls those allegations "totally false" and says his legal team will file paperwork in court to refute the claims. The attorney says that he hired an outside IT expert to investigate the source of the alleged text messages and that the IT expert found nothing.
"I went out and hired a respected IT expert, gave them access to Mr. DiCrisci’s computers, and they found nothing," DeMaria says. "These are false allegations, totally made-up and false. They're just trying to settle the case. We plan to offer a formal buyout at fair value."
In the meantime, the Wall Street Journal reports, cancer patients are struggling to afford lomustine. The drug is not widely prescribed but has reportedly seen a "renewed interest" from doctors after a recent series of government-funded studies showed lomustine could help patients with brain tumors live longer. According to the Journal, one family was told a 30-day supply of lomustine would cost $2,815. The family elected to use another drug.
Update: DiCrisci has since filed a motion to dismiss Schafer and Yankana's claims. The full text of the court filing can be found here.