The nationwide college admissions scandal that earlier this week swept up a prominent biotech venture capital investor started with another investor who was under investigation for securities fraud involving a drug company, according to a news report.
Citing a person familiar with the investigation, The Wall Street Journal reported Thursday that the scandal began with a tip from Morrie Tobin, a Los Angeles resident who was under investigation by the Securities and Exchange Commission for a pump-and-dump investment scheme. The alleged scheme involved two companies that Tobin secretly controlled, one of which was CURE Pharmaceutical Holding Corp., according to an SEC complaint. The SEC said that Tobin conspired with three others to sell his shares at a profit by not registering the sales with the SEC, disclosing his ownership or complying with limitations on stock sales. As such, they allegedly disguised a dump of shares as ordinary trading by unaffiliated investors. The other company the commission alleges Tobin controlled was Environmental Packaging Technologies Holdings.
According to the Journal, Tobin – a Yale University alumnus – told investigators the head of the Yale women’s soccer team had sought a bribe to get his daughter into the university, which led them to the larger scheme. According to the Department of Justice, at least 50 wealthy individuals in eight states allegedly bribed athletic and admissions officials at elite universities to enable cheating on entrance exams and false athletic recruitment in order to get their children into the schools. Universities involved included Yale, Stanford, the University of Southern California, Wake Forest and Georgetown.
One of the individuals arrested was Manuel Henriquez, founder and CEO of Hercules Capital, a hedge fund and venture capital firm based in Palo Alto, California, that has a significant presence in life sciences investment. Henriquez and his wife, Elizabeth, turned themselves in to authorities in New York and were released on $500,000 bond after an appearance in federal court. They are expected to appear in a federal court in Boston on March 29, according to federal prosecutors. Actresses Felicity Huffman and Lori Loughlin were also arrested in connection with the scheme.
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