This is Chapter 6 of a 15 chapter series. The entire series is listed here

When the FDA’s advisory panel voted in favor of Provenge, most Wall Street research analysts were
predicting a bright future for Dendreon. But as naked short sellers piled on with ever increasing gusto,
hedge fund managers continued to whisper in reporters’ ears. And two Wall Street analysts did more than
whisper – they shouted, day after day, that Dendreon’s treatment for prostate cancer was doomed.
One of these analysts is named Jonathan Aschoff, who works for a financial research outfit called Brean
Murray Carret & Co. The day after the advisory panel vote, in an interview with Reuters, Aschoff made the
long-shot prediction that the FDA would not approve Provenge, but would instead ask Dendreon to supply
additional data showing that the treatment was safe and effective–a process that could take years. Soon
after, Aschoff told other media outlets that the FDA would set a “dangerous double standard” by
approving Provenge because the treatment “did not meet its primary goal in two Phase III trials.”
During the first days of April 2007, Aschoff was everywhere, continuously repeating this notion that the
FDA would set a “dangerous double standard” by approving Provenge. On April 9, Aschoff reiterated his
“sell” rating for Dendreon, setting a target for the stock at a mere $1.50, which implied that the stock
would lose more than 90 percent of its value by the end of the year. Reuters, Associated Press, CNBC
and other media dutifully reported Aschoff’s comments as though they shed light on the merits of
Dendreon’s prostate cancer treatment.
Aschoff’s performance raises a few basic questions. The first is, how did a Wall Street analyst know that it
would be “dangerous” to approve a medical treatment? It is an odd day, indeed, when the media turns to
Wall Street for wisdom on matters of science and health.
The second question is, why was Aschoff so confident that the FDA would not approve Provenge? Given
that the FDA had followed its advisory panels’ decisions in 97% of cases, and in 100% of cases involving
drugs for dying patients, Aschoff’s prediction seemed rather far out. What did he know that the rest of the
world did not know?

The third question is, who is Jonathan Aschoff?

In 2003 – back when journalists still occasionally investigated stories, rather than parroting whatever
hedge funds and Wall Street analysts whispered in their ears – The Wall Street Journal won a Pulitzer
Prize for a story that nailed Jonathan Aschoff for being a fraud.
According to the Journal, Aschoff often impersonated doctors in order to acquire inside information on the
status of drug trials underway at his target companies. A certain Dr. Cunningham, who worked at a
cancer center in Dallas, told the Journal that he initially believed that Aschoff was a doctor. But he
discovered that he was dealing with a fraud when he mentioned to Aschoff that an experimental treatment
had caused some reduction of “lymphadenopathy.”
“What’s that?” asked Aschoff. He didn’t have a clue, even though “lymphadenopathy” is a common
medical term. It means, “swollen lymph nodes.”
Aschoff was ultimately sanctioned by the SEC for his fraudulent efforts to obtain insider information.
Nonetheless, some years later, the Associated Press, Reuters, and other media outfits were willing to
believe that Aschoff knew enough about medicine to be quoted as a reliable source – a source who had,
for some reason, concluded that Dendreon’s treatment for prostate cancer was “dangerous.”
What reason did Aschoff have for reaching that conclusion?

One more question: Which hedge funds were paying Aschoff’s bills?
There is one particular network of hedge fund managers that is known to pay “independent” financial
research shops to publish biased or false negative reports on companies that they are selling short.
Former employees of “independent” financial research firm Gradient Analytics have provided sworn
affidavits that hedge fund manager David Rocker–once the largest outside shareholder of TheStreet.com;
former employee of Milken-Boesky crony Michael Steinhardt (son of “the biggest Mafia fence in America”)
and Steve Cohen ( “the most powerful trader on Wall Street;” reportedly investigated by the SEC for
trading on inside information provided by Milken’s shop Drexel Burnham) heavily influenced, edited,
dictated, and in some cases actually wrote Gradient’s false, negative research about public companies.
That means, of course, that Cohen and Rocker had copies of “Gradient’s” research before it was
published, which is also highly improper.
And emails acquired by Deep Capture show that Cohen and hedge fund manager Jim Chanos, among
others in their network, received and traded ahead of biased reports published by a research outfit called
Morgan Keegan. After Deep Capture reporter Judd Bagley broke this story, the SEC began an
investigation into the matter (an investigation which, if history is any guide, the SEC will never conclude).
Were hedge funds in this network dictating Aschoff’s research, too? I don’t know the answer to that
question, but it is worth noting that after the SEC sanctioned Aschoff for impersonating doctors, Aschoff
went to work for Sturza’s Institutional Research, an outfit owned by a fellow named Evan Sturza.
The SEC has launched (but never completed) multiple investigations of Sturza’s companies, which
catered to a particular network of short sellers by publishing negative commentary on biotech companies.
For example, in 1996, the SEC began (but never completed) an investigation into whether Sturza

conspired with the above-mentioned Michael Steinhardt and a firm called Gilford Securities to take down
the stock of a biotech company called Organogenesis.
In the 1980s, Gilford Securities employed Jim Chanos (the above-mentioned fellow who is now under
SEC investigation for trading ahead of biased research reports). Chanos manages a few hedge funds, the
most famous of which is called Kynikos Associates. He is also the head of the short seller lobby in
Washington, and a favored source of information for the New York financial press.
In 1985 – back when Chanos was still at Gilford; back when journalists did investigations rather than
parrot what Jim Chanos whispered in their ears – way back then is when The Wall Street Journal
published a front page story about a “network” of short sellers said to include Jim Chanos and Michael
Steinhardt. The story suggested that this network destroyed public companies for profit and described
some of the more egregious tactics – espionage; impersonating journalists to get inside information;
conspiring to cut off companies’ access to credit; spreading dubious information – that were employed by
Chanos and others in his network.
At the time, Chanos made some effort to publicly distance himself from Michael Milken. And he recently
told one reporter that lawyers threatened him in the 1980s because he was selling short companies that
had been financed by Milken’s junk bonds. However, the truth is that Chanos’s short selling in the 1980s
tended to support Milken’s machinations, and in later years Chanos remained very much a part of the old
Milken network.
Chanos got his big break in the 1980s by short selling and ultimately destroying a company called
Baldwin United. As part of this effort, Chanos and his colleagues at Gilford Securities went so far as to
meet with Baldwin United’s bankers, and convinced the bankers to cut off Baldwin’s access to credit.
Soon enough, the company went bankrupt, and Michael Milken quickly got himself hired as advisor to the
bankruptcy.
According to a well-known businessman who was involved in the bankruptcy proceedings, Milken abused
his advisory position, handing out confidential information to his network, which ended up owning much of
Baldwin’s assets.
As the story goes, Chanos’s take down of Baldwin impressed Michael Steinhardt, who then introduced
Chanos to his key limited partners – including Ivan Boesky (later convicted and imprisoned for
manipulating stocks with Milken) and Marty Peretz (crony of Milken and Boesky, later TheStreet.com cofounder with Boesky crony Jim Cramer).
Peretz, an aristocrat who has long been a part-time professor at Harvard, introduced Chanos to one of his
former students, Dirk Ziff, who manages a hedge fund called Ziff Brothers Investments. The emails cited
above show that Ziff Brothers, like Chanos and Steve Cohen, was receiving advance copies of those
Morgan Keegan reports.
Dirk Ziff is part of the network of which I write. Indeed, Chanos launched his first hedge fund out of Dirk
Ziff’s offices. This was a few years after Chanos left his position at Gilford Securities, which had a few key
clients, one of whom was Michael Steinhardt (son of “the biggest Mafia fence in America.”)
In the 1990s, five Gilford Securities traders–Chester Chicosky, Todd M. Nejaime, Lawrence Choiniere,
Kevin P. Radigan, and William P. Burke – were arrested as part of Operation Uptick, the biggest Mafia
bust in FBI history. Although some of these traders had left Gilford by the time they were indicted, they
were charged with crimes allegedly committed while they were still working for Gilford. Specifically, the
Gilford traders were charged with accepting bribes from a Mob-run brokerage called DMN Capital, and for
helping to manipulate stocks with a cast of characters that included ten Mafia soldiers and a former New
York police detective.

I asked H. Robert Holmes, who was Chanos’s boss at Gilford, whether he had any comment on the
Mafia’s infiltration of his firm. He said, “I don’t know what you’re talking about? This is He also
said he was completely unaware that any Gilford traders had been arrested for accepting bribes and
manipulating stocks with a large cast of Mafia goons and Mafia associates. That is, he claimed to be
unaware of an event in his company that had been vigorously publicized by the FBI and the SEC.
By the time of Operation Uptick, of course, Chanos was no longer with Gilford. He was then a “prominent
investor” – a member of the world’s most powerful network of financial operators, a network whose
members are portrayed by the press as geniuses and heroes, never mind that this is the very network
that has been destroying companies since 1980s – the very network that is (as should by now be
apparent) comprised of the criminal mastermind Michael Milken and his Mafia-connected cronies.
As a member of this network, Chanos is, of course, on close terms with Jim Cramer of CNBC (who once
planned to run his hedge fund out of Milken co-conspirator Ivan Boesky’s offices). It was owing to Cramer
that Chanos became the largest donor to the political campaigns of New York Governor Eliot Spitzer, who
was Cramer’s best friend and former college roommate. When Spitzer was caught with a hooker and
forced to resign, it emerged that the hooker, “Ashlee Dupre”, had been living rent-free in Chanos’s
beachside villa. Ashlee called Chanos “Uncle Jim.”
I tell you all this only to show the relationships that bind some particularly destructive short sellers and
miscreants. It is this network that attacked the big banks last year, helping trigger the collapse of the
financial system. And members of this network are the most “prominent” players in the biotech space.
One of those players is Jonathan Aschoff, the doctor-impersonating fraud who was, in the Spring of 2007,
making the long-shot prediction that the FDA would not approve Dendreon’s “dangerous” treatment for
prostate cancer. As we know, Aschoff previously worked for Sturza’s Institutional Research, run by a
fellow who faced multiple SEC investigations (none of which led to any action) for allegedly publishing
false information to help short sellers manipulate stocks.
Under the strain of those investigations, Sturza shut his operation down. Now Sturza helps manage a
hedge fund called Ursus. Ursus is owned by Jim Chanos, the Steinhardt protégé who housed the hooker
of Cramer’s former college roommate, Eliot Spitzer.
Ursus specializes in shorting biotech stocks. There are Wall Street brokers who say that Ursus was short
selling Dendreon while Sturza’s disciple, Jonathan Aschoff, was bashing the company and others in this
network were looking to cash in.
But it is difficult to know for sure whether Ursus was selling short. It is difficult to know who was
responsible for flooding the market with at least 9 million (and maybe tens of millions of) phantom
Dendreon shares. It is difficult to know because the SEC does not require hedge funds to disclose their
short positions, and does not release information on who is selling stock and failing to deliver it.
As far as the SEC is concerned, it’s all a big secret.
But we do know that Aschoff was predicting that Dendreon’s stock would sink to $1.50 right after
Dendreon received an overwhelmingly positive vote from the FDA’s advisory panel, and right before
Dendreon was derailed by some singularly strange occurrences. In addition, we know that at this time
only ten hedge funds on the planet held large numbers of Dendreon put options (bets against the
company), and that at least seven of those hedge funds can be tied to the famous criminal Michael Milken
or his close associates.
Michael Milken, of course, is not just a criminal, but also a “prominent philanthropist” whose Prostate
Cancer Foundation has received much acclaim from the world at large. But, as we will see, it was not just

those seven hedge funds, but Michael Milken himself, who stood to earn a tidy profit from the strange
occurrences that were to derail Dendreon, a company with a promising treatment for prostate cancer.