Tip That Launched College Bribery Scandal Case Came From Pharma Pump-and-Dump Investigation
Published: Mar 15, 2019
By Mark Terry
The college bribery scandal that is currently lighting up the media was brought to light by a Securities and Exchange Commission (SEC) investigation into a pharmaceutical pump-and-dump case.
The scandal, dubbed Operation Varsity Blues, revolves around dozens of wealthy parents paying a college consultant to help cheat on entrance exams and falsify student athlete profiles, as well as bribing coaches at a number of prestigious universities. These include Yale University, the University of Southern California, Georgetown University and Stanford University.
But what got the entire college bribery scandal going was actually a separate case. Morrie Tobin was being investigated by the SEC for manipulating the stocks for at least two companies, Environmental Packaging Technologies Holdings and CURE PharmaceuticalHolding Corp. Called a pump-and-dump scheme, similar to that at the center of the film The Wolf of Wall Street, Tobin and several other investors worked to artificially inflate the price of the stock so they could sell it at a profit.
Tobin, who attended Yale University and currently works and lives in Los Angeles, as part of a plea deal with the SEC, told them that the head women’s soccer coach at Yale had demanded a bribe from him for getting his daughter into the school. It was this tip that launched the investigation into what has been dubbed Operation Varsity Blues.
Tobin is not charged in the college bribery scheme. In fact, he assisted further in the investigation by wearing a wire to a meeting in a Boston hotel room with Yale women’s soccer coach Rudy Meredith, according to the Wall Street Journal. In that meeting, Meredith reportedly told Tobin he could designate Tobin’s daughter as a recruit in exchange for $450,000.
Using that information, federal investigators forced Meredith to cooperate with the investigation. Meredith apparently worked with William Rick Singer, the college consultant who is also central to the bribery scandal. In January 2018, according to the Wall Street Journal, Meredith helped another California girl get into Yale by pretending she was a soccer player. That family paid Singer $1.2 million, with Meredith’s share being $400,000. That family has not been identified.
So far, Meredith has pleaded guilty to two counts of wire fraud.
Tobin originally lived in Canada, attended Yale University in the 1980s, playing hockey for the school, then transferred to the University of Vermont. One of his daughters, Rachel, graduated from Yale in 2015. Two of his other daughters are currently a junior and senior at Yale.
In the securities fraud case, Tobin and three others, were charged in November 2018. According to the Wall Street Journal, “they concealed from investors beginning in 2013 Mr. Tobin’s control of two public companies, Environmental Packaging Technologies Holdings Inc. and CURE Pharmaceutical Holding Corp. Mr. Tobin then sold his shares without registering the sales with the SEC, without disclosing his stakes in the companies and without complying with SEC limitations on stock sales by company insiders.”
Tobin’s stock was transferred to two offshore assets managers, who sold millions of dollars of the shares to investors. The complaint stated, “What appeared to be ordinary trading by unaffiliated investors was actually a massive dump of shares by a company insider and his team seeking to profit at the expense of defrauded investors.”
Tobin has pleaded guilty to one count of conspiracy to commit securities fraud and one count of securities fraud. Sentencing is scheduled for June. Prosecutors have recommended the forfeiture of $4 million that was obtained in the scheme and 36 months of supervised release. The prosecutors indicate those penalties are at the low end of the sentencing guidelines and reflect Tobin’s “prompt acceptance of personal responsibility in this case, but the plea agreement doesn’t mention his role in exposing the college admissions fraud,” reported WSJ.
At this time, 50 people, including 33 parents and nine athletics coaches and administrators, have been charged in the college bribery scheme. Two prominent actresses, Lori Loughlin and Felicity Huffman, have been indicted in Operation Varsity Blues. Another prominent individual indicted was Manuel Henriquez, founder and chief executive officer of Hercules Capital, a hedge fund and venture capital company in Palo Alto, Calif., who has a significant role in life sciences investment.