Portfolio Changes

I made some changes to the portfolio today, based on two bits of bad news.

The first bit of bad news came from last week's Poore Brothers conference call. The new CEO, Eric J. Kufel, apologized for the abysmal downturn in SNAK's business and promised a turn-around. I expected this, judging from the stock price and events of Q4 2005. But then I listened to the dismal roll-out of the Cinnabon-branded snacks. Kufel mentioned significant inventory write-downs, and said that Poore Brothers management was considering all options regarding the Cinnabon endeavor, including killing it.

The tasty cinnamony morsels on the Poore Brothers website were a (minor) deciding factor in my decision to start a position in SNAK at $2.65. Thoughts of cream cheese icing convinced me to add to the SNAK position at $2.60.

This afternoon, I sold my shares for $2.80, a perfectly reasonable profit after losing my justification for holding the shares.

The second bit of bad news came in the BNBNRBN variety. An ongoing criminal investigation involving a corpse tissue thief mentioned Lifecell.

From NorthJersey.com:

Ex-dentist indicted in plot to sell body parts
Thursday, February 23, 2006

By TOM TRONCONE
STAFF WRITER


The owner of a Fort Lee tissue recovery firm has been indicted in a plot to sell body parts from corpses illegally dissected in New York funeral homes, his lawyer confirmed Wednesday night.

Michael Mastromarino, a once promising dental surgeon, surrendered to authorities in Brooklyn late Wednesday night, said attorney Mario Gallucci.

Mastromarino allegedly stole tissue from the cadavers and sold it to tissue banks for use in medical and dental implants.

It was unclear whether Mastromarino would face any charges in connection with his work with New Jersey funeral homes. The majority of his tissue harvesting was conducted in New Jersey, but so far allegations have surfaced only in Brooklyn.

The Kings County District Attorney's Office would not discuss the investigation. However, a spokesman for the office confirmed that a press conference regarding the case was scheduled for 1 p.m. today.

Mastromarino will appear in court shortly after the news conference, said Gallucci, of Staten Island. The attorney said his client committed no crimes while harvesting tissue for legitimate sale and will fight the charges.

Gallucci expects that at least three other people could be indicted in the case. They likely include staff at the firm, BioMedical Tissue Service, and could include Mastromarino's alleged partner in the scheme, 49-year-old Joseph Nicelli, a former Brooklyn funeral home owner.

Gallucci said he could only speculate on what charges might be included in the indictment when it is unsealed today.

"The fact that the prosecutor hasn't told me what they are and wants him in custody before he tells me leads me to believe it includes state racketeering charges," Gallucci said.

Mastromarino might also face fraud and forgery charges, the lawyer said.

"We absolutely, vehemently deny the charges," he said. "He was not doing anything illegal or wrong when he harvested."

Mastromarino was a respected dental surgeon with offices in New York and Fort Lee before drug use sidelined his career. After surrendering his dental license in 2000, he entered the world of biomedicine, extracting bones, tendons and skin from hospitals, morgues and funeral homes.

The case involves allegations that the ring carved up the remains of "Masterpiece Theatre" host Alistair Cooke, who died of cancer in 2004 at age 95, and sold them on the open market. In another case, a Brooklyn grandmother's leg bones were replaced with pipes.

Since investigators opened the case in October, dozens of people around the country -- including at least 60 in New Jersey -- have been notified that bones and other implants they received in surgeries have been recalled. Several lawsuits have been filed.

The case also has sparked calls for tighter regulations on the tissue industry, in which more than 1 million bone, tendon and skin transplants help cancer and burn victims annually.

According to New Jersey dental board records, Mastromarino surrendered his dental license in November 2000 after he tested positive for cocaine and the narcotic meperidine. He was arrested for possessing Demerol, a painkiller.

Mastromarino, 42, and his wife, Barbara, live in a $1.5 million house on the Palisades in Fort Lee.

Mastromarino came under suspicion when Branchburg-based LifeCell, which purchased tissue from him, found irregularities while reviewing documents pertaining to the donors.

LifeCell discovered that the phone numbers for the donors' physicians were wrong. The phone numbers listed for family members who gave consent for the donations were also wrong, leading the company to believe the tissue was harvested illegally. LifeCell executives immediately alerted the U.S. Food and Drug Administration and voluntarily recalled compromised batches of tissue.

Late last year, the FDA ordered a recall of the potentially tainted products because of an exposure risk to HIV and other diseases.

However, FDA officials insisted the risk is minimal.

The FDA shut Biomedical Tissue Services on Feb. 3 after allegedly uncovering evidence that the firm failed to screen for contaminated tissue. The agency also said it found that death certificates in the company's files contradicted state files on age of death and cause of death.

I know, it takes a while before Lifecell gets mentioned, but when it does, LIFC acted as a responsible corporate citizen. Lifecell investigated the situation, notified the FDA immediately, and recalled batches voluntarily.

I call this Bad News But Not Really Bad News. Yes, the stock dropped 4% yesterday. It dropped another 2% today, just in time for me to take my SNAK money and increase my LIFC position at $21.25 per share.

Why did LIFC drop again today after rebounding at the end of trading yesterday? I'm guessing more BNBNRBN stories from the Rochester and Syracuse newspapers:

7 got suspect tissue, report no ill effects


Matthew Daneman
Staff writer


(February 23, 2006) — Suspect bone and tissue harvested by Biomedical Tissue Services found its way into the bodies of several local patients. None has reported any ill effects.

In October, the U.S. Food and Drug Administration directed the recall of all material that originated with the company, and recommended that hospitals and physicians notify any patients who had received material from that company.

Hundreds of patients nationwide have received that notification in recent months.

Locally, the University of Rochester Medical Center found that it had used nine tissue specimens from Biomedical in medical procedures involving seven patients at its hospitals, spokeswoman Karin Gaffney said Wednesday.

A spokesman at Rochester General Hospital did not respond to a call early this week about any patients affected there. A Park Ridge Hospital spokeswoman did not return a call placed Wednesday.

The UR contacted its seven patients after it received letters from LifeCell of New Jersey and Regeneration Technologies of Florida, both of which provide tissue to UR for medical procedures, Gaffney said. In all, five regional or national tissue processors had acquired material from Biomedical Tissue, according to the FDA.

The seven URMC patients were offered counseling and free testing for HIV, hepatitis and syphilis. None of the seven has experienced any related health problems , Gaffney said.

Several people elsewhere have claimed they contracted syphilis or hepatitis from Biomedical Tissue implants.

UR went through its tissue bank and its database of tissue to make sure it had no Biomedical Tissue Services material on hand, Gaffney said. She said it was the first such recall at UR.


Two CNY patients got tissue linked to indicted supplier
Community General received products from New Jersey firm in body-parts probe.
Friday, February 24, 2006
By Delen Goldberg
Staff writer
Two patients treated at Syracuse's Community General Hospital received transplant tissue supplied by a company facing charges of harvesting skin, bones and tendons from cadavers without permission or proper screening, a hospital spokeswoman said Thursday.

The hospital would not name the patients Thursday or say whether they got sick.

Community General received products supplied by Biomedical Tissue Services Inc., a New Jersey company currently being investigated for selling stolen cadaver tissue for use in skin grafts, dental implants and hip replacements. Biomedical Tissue Services was one of dozens of companies that provided tissue specimens to LifeCell Corporation, Community General's tissue supplier.

In a short statement released Thursday night, Community General spokeswoman Maria Damiano said the hospital "conducted a thorough investigation" and "considers the matter resolved."

Damiano would not elaborate Thursday. She would not say whether the hospital offered free counseling and testing for diseases, as many of LifeCell's other clients did. Hospital President and CEO Thomas P. Quinn did not return several calls.

Late last year, the Food and Drug Administration ordered a recall of the potentially tainted products and warned that an un-

told number of patients could have been exposed to HIV and other diseases during the procedures. The FDA said the risk of infection was minimal.

On Feb. 3, the FDA shut Biomedical Tissue Services, saying it had uncovered evidence the firm failed to screen for contaminated tissue. The agency also said it found that death certificates in the company's files were at odds with those on file with the state over the age of the deceased and the causes and times of death.

Authorities on Thursday announced a 122-count indictment charging four people, including Biomedical Tissue Services founder Michael Mastromarino, with looting dead bodies.

Mastromarino, Joseph Nicelli, a Brooklyn mortician, and two other defendants, Lee Crucetta and Christopher Aldorasi, pleaded not guilty to charges including enterprise corruption, body stealing, opening graves, unlawful dissection and forgery. Each would face up to 25 years in prison if convicted, prosecutors said.

Authorities released gruesome photos of decomposed bodies that were exhumed as part of a widening investigation expected to result in more arrests. The photos offered proof that the defendants removed bone and replaced it with plastic pipe - normally used for plumbing - to conceal the theft, District Attorney Charles Hynes said.

Hynes compared the crimes to "something out of a cheap horror movie."

Among the bodies said to be tampered with was that of "Masterpiece Theatre" host Alistair Cooke, who died in 2004. Paperwork was doctored to show Cooke's cause of death as a heart attack and his age as 85. He died of cancer at age 95.

Mastromarino's defense attorney Mario Gallucci has said his client "vehemently denies doing anything illegal or wrong."

LifeCell, which used tissue from Biomedical Tissue Services for several skin graft products, issued a recall on Sept. 30. Community General conducted an investigation shortly after, Damiano said.

Community General appears to be the only hospital in Central New York to receive potentially tainted tissue. Other hospitals in the region use tissue supplied by different companies that never worked with Biomedical Tissue Services, spokespeople for those hospitals said.