Viceroy Research and members sued for defamation, dishonesty and fabrication in US court

American healthcare real estate company Medical Properties Trust (MPT) has started a defamation lawsuit in a US federal court against short-selling Viceroy Research and its three members over what it says are bogus, fake and fraudulent financial analysis reports linking it to medical company Steward Healthcare International (SHCI) Malta hospitals issue.

One of the biggest real estate medical companies in America, MPT has sued for defamation the Viceroy Research LLC and its members Fraser John Perring, Gabriel Bernarde and Aidan Lau following the short-selling Viceroy Research “repeatedly publishing baseless allegations to drive down the company’s stock price”.

MPT maintains in its scathing filing that Viceroy Research has been involved in a conspiracy against the company to make money by spreading false news and therefore the lawsuit seeks permanent injunctive relief, disgorgement of ill-gotten gains, compensatory and punitive damages from Viceroy for defamation, civil conspiracy, tortious interference, private nuisance, and unjust enrichment.

MPT, which leases hospital property to medical groups in the United States, has told the District Court of Alabama that Viceroy Research deliberately and maliciously lied in its reports “about its connections to Steward” in Malta for nefarious purposes and to “prop up its short attack” against the company by claiming it is deliberately concealing secret ownership in Steward-connected hospitals in Malta. MPT has denied any links in its legal claim filed in the state of Alabama where MPT headquarters are based.

“These are falsehoods, ginned up to try to undercut investor and public confidence in MPT and harm the company,” says MTP said in court filings, describing Viceroy Research’s reports as completely false and a clear-cut case of market manipulation aimed at driving down MPT’s share price in a clear case of short-selling exercise.

MPT says in its claim that Viceroy Research and its team – Fraser John Perring, Gabriel Bernarde, and Aidan Lau – are “in the business of mounting serial short-and-distort attacks against public companies” and that “MPT is their latest victim” as MPT has been linked by them with the Malta deal, maliciously and falsely, in a bid to damage its share price and make a short-selling profit off what it says was bogus research it published.

In the court filing, MPT says that Viceroy follows a playbook for such malicious attacks: “The playbook for these attacks is simple: Take a short position in a stock or partner with someone who has one, publish false ‘research’ critical of the target company, amplify the false claims on social media, and then reap a profit— either directly, from the stock price drop you bet on and then caused, or indirectly, by collecting payments from other market players who profited on the drop.”

The lawsuit says “this action arises from a campaign to defame, injure, and drive down the stock price of MPT, one of Alabama’s largest public companies and its largest real estate investment trust (“REIT”).

MPT lawsuit says Viceroy Research’s Fraser Perring—a self-proclaimed “Grand Poobah” of short-sellers — “entered the distortion game after British regulators revoked his social work license upon finding that he had lied and fabricated evidence. Perring founded Viceroy with Bernarde and Lau in 2016, and the firm has become notorious for short-and-distort schemes. In 2021, for example, a South African regulator fined Viceroy’s members millions of dollars for spreading false and misleading claims about a South African bank on behalf of a hedge fund that was trying to drive down the bank’s stock price. Defendants escaped justice, however, when a tribunal vacated the penalty for a jurisdictional defect.”

The claim says: “Short-selling is not illegal in the United States, and criticism of public companies is integral to our capital markets. Nor is it illegal to couple short-selling with criticism of a target company, provided the speaker does not deliberately or recklessly misrepresent facts for profit. But Viceroy does not play by the rules.”

MPT has alleged that for months, Viceroy Research, its three members and their cohorts have been spreading malicious falsehoods about MP and in late January 2023 announced it held a short position in MPT and simultaneously published the first of 14 “reports” on the Company in a steady stream.

The lawsuit says Viceroy Research made false accusations that MPT purportedly engages in illegal “round-trip” transactions by “overpaying” owners of hospital properties and leasing those properties back to the sellers and that MPT executives were engaging in “fraud” and juicing their own compensation. At the same time, the lawsuit says, Viceroy, Fraser and others started a Twitter campaign using the hashtags “#fraud” and “#Ponzi scheme”— urging investors to dump MPT stock, accusing MPT of “involvement in #Corruption” and “scamming investors,” and promising his followers that MPT’s “employees will go to prison.”

MPT says that these allegations by Viceroy Research, Fraser John Perring, Gabriel Bernarde and Aidan Lau are “malicious fiction, concocted to manipulate the market and to drive profits from short-selling. As outrageous as they are, Defendants’ falsehoods have influenced the market and caused serious harm to MPT. Since Viceroy began its attacks, MPT’s stock price is down over 35 percent, a potential counterparty has pulled away from a commercial transaction, and MPT has had to increase physical security at its Birmingham headquarters. Several analysts who follow MPT have observed the impact that the short attack has had on the stock.”

MPT says: “Sometimes charlatans spread their lies to no effect. That, unfortunately, is not the case here. MPT brings this action to stop Defendants repeating their lies, to recover damages for the harm caused by those lies, and to compel Defendants to disgorge the ill-gotten gains earned on the back of those lies.”

The claim says Viceroy Research LLC is a self-described “financial research” firm that publishes negative content about public companies whose shares it has sold short; its co-founders are Defendants Fraser John Perring, Gabriel Bernarde, and Aidan Lau; Viceroy has no headquarters or employees, observes few if any corporate formalities, exists solely to shield its owners from personal liability for their short-and-distort schemes and that Viceroy’s limited liability structure does not shield Perring, Bernarde, and Lau from personal liability for Viceroy’s tortious and unlawful actions.

The lawsuit explains at length to the court about its primary purpose which is to acquire and develop healthcare facilities like hospitals and lease them to operating companies under long-term net leases, and at the same time invest with global companies in the healthcare sector.  With investments in 444 facilities — 427 of which are leased to 55 tenants — and revenues exceeding $1.5 billion in 2022, MPT is one of the largest Real Estate Investment Trusts (REITs) in the healthcare sector and among the largest publicly traded companies in Alabama, where the majority of its employees are based.

The MPT lawsuit tells the court that Viceroy and Perring has a “documented history of dishonesty and fabrication”. It says Fraser Perring was a social worker in Lincolnshire County, England, and he was dismissed from his job after “the Council found that Perring “created false records” to “cover up” “his significant failure,” and then threatened to refer his manager to the police when confronted.3 Ultimately, the Council determined that Perring had engaged in “deliberate, persistent and dishonest conduct,” and created the “significant” potential for “serious harm”.” 

The lawsuit says Fraser Perring then started a Blogspot website in partnership with an investor named Matthew Earl who told The Foundation for Financial Journalism FFJ) that Perring plagiarized research, impersonating professional contacts, and proposing an insider trading scheme. Perring then formed Viceroy in 2016 Bernarde and La whou, like Perring, have no institutional investment experience.

It says Viceroy’s business consists of taking short positions in public companies and then disseminating negative information about those companies through public reports and social media posts in order to drive down the price of the companies’ stock. 

The lawsuit gives an example of a South African case in January 2018 where Viceroy called South African bank Capitec “[a] wolf in sheep’s clothing” and a “loan shark . . . masquerading as a community microfinance provider.” During the investigation the Financial Sector Conduct Authority (FSCA) fined Viceroy’s members 50 million Rand (about $2.8 million) for having “made a concerted effort to publish . . . false, misleading and deceptive [statements] regarding material facts” and having demonstrated “no interest in setting the record straight” when “presented with clear explanations for why their statements had been false.”

All the while, says the claim, Viceroy had been doing a hedge fund’s bidding. South Africa’s Financial Services Tribunal found that Viceroy had agreed to “assist [the hedge fund] in shorting securities in any chosen company” for “a monthly retainer” of $10,000 and a cut of the profits from the hedge fund’s trades.  “Viceroy produced its false report “under this agreement” and earned an estimated $744,000 from the short-and-distort conspiracy,” it says. 

The Alabama court lawsuit says Viceroy started its calculated attack on MPT on January 26, 2023 with a report titled “Medical Properties (dis)Trust.” On the same day Viceroy, Perring, and Bernarde used their Twitter accounts to promote the report and launch a vitriolic and defamatory social media campaign against MPT. To drive home the defamatory accusations against MPT, Perring tagged his posts using the hashtag “#fraud” and then Viceroy published several more reports, all making false and defamatory allegations. 

The lawsuit says market commentators are free to offer critical opinions about MPT as this fall within the wide berth granted by the First Amendment “but an unconscionably large amount of it does not” and “in an effort to drive profits for themselves, Defendants have engaged in a coordinated campaign to disseminate false, misleading, and defamatory statements about MPT, all with knowledge or reckless disregard of the statements’ falsity”.

The court has been told that Viceroy and its three members lied, misled, defamed and made false accusations of revenue “round-tripping”; false characterizations of MPT’s executive compensation formula; false accusations of lying about dealings with operator-tenant Steward; and false accusations of fraud and criminal activity.

The lawsuit says the defendants, in an effort to prop up their short attack, have accused MPT of lying about its connections to Steward. In particular, they have released a series of reports claiming that MPT is deliberately concealing a secret ownership in certain Steward-connected hospitals in Malta. “These are falsehoods, ginned up to try to undercut investor and public confidence in MPT and harm the Company.”

Lawyers of MPT have told the court that Viceroy and Fraser John Perring made accusations of scamming and fraud and encouraged criminal investigations as part of their campaign to artificially depress MPT’s stock price and they coupled their targeted false statements with extravagant accusations of criminal wrongdoing. 

In particular, the legal claim says Fraser Perring used his Twitter to post a steady barrage of false statements, referring to MPT as a “fraud”, “fraudulent”; “scam”, “rotten to the core,”, “corruption,” and “Ponzi”. 

Perring has coupled these attacks with repeated promises that MPT executives and employees are headed to prison for “fraud.” For example, on February 1, 2023, Perring tweeted: “Make no mistake there will be charges here. Its #Fraud.” On February 27, 2023, Perring tweeted: “#Its Coming – Class Action Lawyers smell the blood. People are going to prison who are involved with $MPW & @Steward. #RoundTripping & #Fraud. #MPW”.” 

MPT lawsuit tells the court: “All of these statements are false, misleading, and defamatory. A reasonable reader would understand Perring’s assertions to be statements of fact about MPT’s business and management. MPT is not a “[s]cam,” “Ponzi scheme,” or “fraud.” It is not “part of an international corruption investigation.” It is not engaged in “round tripping.” But because accusing MPT of dishonesty and corruption, and prejudicing MPT’s business, is in Defendants’ financial interest, Defendants have slung this defamatory invective anyway.”

The lawsuit informs the court that Viceroy tries to couch its “slanderous falsehoods” as opinions by using qualifiers like “believe” and “appear” but these disclaimers are contradicted, however, by Viceroy’s boast that its “mission is to sift fact from fiction” and the false, misleading, and defamatory statements are not “opinions” or “beliefs” but rather statements of purported fact, whose fundamental character cannot be altered by disclaimers. 

The claim has accused that the Defendants have not operated alone in past short-and-distort campaigns and have joined forces with others who share their economic interest in trashing MPT. 

The claim says: “Defendants and the agents of this co-conspirator firm have parroted one another’s language and accusations about MPT, retweeting each other’s messages with accompanying words of support, replying within threads, and tagging one another in posts. Both have accused MPT and its executives of fraud and artificial boosting of executive compensation, and both have even perpetuated false statements about MPT’s supposed ownership of Malta hospitals. “

The lawsuit says: “Unfortunately, lies that are repeated often enough can begin in some people’s minds to resemble the truth. This has caused concrete and ongoing harm to MPT. Defendants’ defamation has damaged MPT’s reputation with potential commercial counterparties. Earlier this month, for example, Steward sought to broker a deal with University Health System, in Bexar County, Texas, involving a hospital owned by MPT. University Health pulled away from the deal, citing one of Viceroy’s reports and stating publicly that “our mission and values are not aligned with Medical Properties Trust.

“Defendants’ campaign of defamation has generated unprecedented negativity from credit rating agencies and bondholders. MPT personnel have spent significant time responding to rating agencies’ questions about Defendants’ reports.  Defendants’ defamation has also damaged, and continues to damage, MPT’s relationship with its shareholders. 

“In addition to defaming MPT as a company, Defendants have also attacked MPT’s executives personally. In particular, Defendants have published disparaging remarks about CEO Ed Aldag in an attempt to damage his reputation. 

As a result of the nuisance created by Defendants, prays the claim, MPT is entitled to injunctive relief, as well as compensatory and punitive damages in an amount to be proven at trial.

It adds: “The benefits Defendants received were at MPT’s expense. Defendants have benefited from the reduction they caused in MPT’s enterprise value and the expenditures of time and resources MPT has undertaken in response to Defendants’ unconscionable conduct. Defendants also have benefited at the expense of MPT’s shareholders. MPT reasonably expects that Defendants will compensate MPT for the benefits Defendants have received unjustly and without MPT’s consent. It would be inequitable to allow Defendants to retain their ill-gotten gains, borne of their malicious and illicit short-and-distort scheme.  Therefore, MPT is entitled to an order requiring Defendants to disgorge the benefits by which Defendants were unjustly enriched. Alternatively, a constructive trust should be imposed upon those benefits, to be forfeited and disposed of pursuant to the Court’s instructions.”

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