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Shares of Canada's biggest biotech initially hit a new intra-day low this morning of 10 bucks a share this morning, but rallied into the close as investors seem to like the fact that the company may have extricated itself from allegations of financial fraud.

The Securities and Exchange Commission is settling with Biovail

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[BVF  Loading...      ()   ] for a $10 million penalty. But the SEC is pursuing charges against Biovail founder and former CEO Eugene Melnyk, the former CFO and the current CFO and controller, both of whom the company says have been reassigned. You can read the SEC press release and the entire 55-page complaint here.

In an interview with me this afternoon, the Director of the SEC's New York Regional Office, Mark Schonfeld, wouldn't say if the four men had been offered a deal. But Melnyk issued a statement earlier today saying he will vigorously fight the charges which he calls, "absolutely false." He's a Canadian citizen who lives in Barbados.

Many of the charges stem from a truck accident in the fall of 2003. Biovail was shipping its anti-depressant Wellbutrin XL to its marketing partner GlaxoSmithKline

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[GSK  Loading...      ()   ] when the truck crashed in Illinois. Soonafter, the company put out a press release saying the wreck would demolish its earnings for that quarter. But at least one analyst didn't buy it.

So, David Maris, who worked at Bank of America at the time, and his team started to do some digging. They called the state trooper handling the crash investigation, got a copy of the accident report, talked to someone at the impound lot where the truck was towed. They also talked to the towing company, and to a local TV reporter or cameraperson who'd shot the scene and watched the report on the TV station's web site. His conclusion: that the truck was nearly empty. He told clients to sell BVF. Biovail then froze out Maris on company conference calls and it later sued him. They settled for a reported $2 million to pay off Maris' lawyers.

I always thought that was just good reporting by Maris and his team. As far as equity analysis is concerned, I guess your opinion of Team Maris' work would depend on which side of the BVF trade you were on.

The company has accused hedge funds of conspiring to drive down its stock price. The SEC's Schonfeld wouldn't comment on those allegations and he said he couldn't/wouldn't say if a criminal investigation has been or will be launched into the current and former execs. But when I asked him if not for Maris' work, would that part of the case have ever come to light, Schonfeld replied, "Part of the credit does go to people who were asking a lot of questions and were rightfully skeptical when the company was making representations that just didn't quite make sense."

Maris left B of A. He now works for a hedge fund where today, I imagine, he's feeling vindicated.

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