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Heard off the Street: You can't make this stuff up about Bico

Monday, March 19, 2001

By Len Boselovic, Post-Gazette Staff Writer

Truth is stranger than fiction, especially when it comes to Bico Inc., formerly known as Biocontrol Technology.

And the truth is that no matter how much CEO Fred E. Cooper and his cronies run Bico, no matter how long a federal grand jury and state securities regulators ponder their actions and no matter how much more red ink the company gushes, the truth will only get stranger.

What started as a flickering beacon of hope for diabetics has ignited into a conflagration of despair funded through the apparently endless issuance of stock. This questionable administration includes exorbitant salaries, sweetheart loans to officers and funding a dubious venture launched by Cooper. So miserable are the shares of the Scott company that I will provide Bico's ticker symbol only if you swear on a stack of Bibles you'll never buy a single share, no matter how cheap it gets. (It's BIKO.OB and a share at Friday's closing price would cost you cents.)

Cooper's modus operandi has been detailed in Bico's Securities and Exchange Commission filings. Some of what you won't find there has been chronicled by Post-Gazette staff writer Patricia Sabatini, who, among other things, reported allegations that Bico changed test results of its flagship product, the Diasensor. The company denied any wrongdoing. Shortly after Sabatini's 1997 story, a federal grand jury began investigating the company.

The Diasensor is a divining rod of sorts for diabetics. Bico promised its 40-pound contraption would conjure a bloodless blood sugar reading, sparing them painful finger pricks. Bico was so confident of the technology that in the early '90s it forecast Diasensor sales of $275 million by 1997.

The U.S. Food & Drug Administration twice rejected the Diasensor. European regulators, while sparing their subjects the horrors of hormone-treated beef, have said it's OK for them to buy a Diasensor. Bico said it sold about 10 machines for $427,603 in 1998, but sales fell to $47,500 in 1999 and there were no buyers last year. The conundrum left Bico feeling like its investors: clueless.

"We've hired marketing consultants to help us figure out why," the company said in a recent securities filing.

You would think Bico's entrenched management, as singularly minded a group of executives as you will find, would have some indication of the problem after losing $223.7 million over the years, including a loss of $42.5 million last year.

The company is in the hands of Cooper, whose credentials for running a medical products company include operating a bar in Carnegie and starting an equipment leasing business that later went bankrupt. It's hard to put a price on such experience, but Bico's insider-dominated board of directors has proven to be up to the task. Over the last three years, Cooper was paid $2.9 million. Founder David Purdy, Senior Vice President Anthony Feola and Vice President Glenn Keeling pocketed $5.3 million more, including $912,727 in severance Purdy received when he ended his Bico career last month and $100,000 put in escrow for his attorney fees.

Although they profess their faith in the inevitable triumph of the Diasensor, the Bico Boys own less than 1 percent of Bico's stock. Most of their holdings aren't even in actual shares. They are in warrants to buy the stock at prescribed prices. Some sage investor must have told Cooper: "Don't buy the cow when you're getting all the milk you need."

Not satisfied with being paid outrageous sums for producing dismal results, Cooper and his colleagues have borrowed more than $1 million from the chronically cash-strapped company. As of Dec. 31, they owed nearly $1.3 million on the loans, including Cooper's balance of $710,864. Bico's balance sheet -- or, more appropriately, its unbalanced sheet -- indicates the company doesn't believe $1.2 million of the loans will be repaid.

The above figures do not include the income Purdy, Cooper, Keeling and two former Bico directors received from renting an office building to Bico. Over the last three years, a real estate partnership they're invested in received nearly $300,000 in rent from Bico. At the same time, Bico was recording a $387,321 loss for not paying rent on its Indiana, Pa., facility not owned by Bico associates.

If anyone were to mount a takeover bid for Bico, Cooper and the boys have that figured out too. In case someone acquires 20 percent or more of Bico's stock, the Bico Boys are entitled to $7.9 million in severance pay over 10 years. They and their families are entitled to 10 years of medical insurance benefits.

Lest you get the impression that the Diasensor makes Bico a one-hit wonder, consider the company's 51 percent stake in, a sports trading card venture that is 30 percent owned by Cooper. After loaning the online firm that's not online yet $55,000, Bico converted the loan to stock last year and invested another $400,000. Not to worry. This money has gone into a company that Bico says "expects to generate revenues."

How does Bico fund such pursuits? Last year, it issued $29.9 million in convertible debt, warrants and stock. Another $3.9 million in convertible debt was sold in the first two months of this year. But it may not be enough. So Bico, which has already issued 1.4 billion of the 1.7 billion shares authorized, is asking shareholders to authorize the issuance of 800 million additional shares.

A vote will be held at the annual shareholder meeting, scheduled for May 17 at the Holiday Inn in Washington, Pa. Anyone inclined to vote yes should just make their check payable to Fred E. Cooper.

Len Boselovic can be reached a

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