While Scott Sacane's hedge fund was piling up huge stakes in two small healthcare companies, a politically connected investment fund with ties to Sacane was selling most of its shares in the same stocks, ownership records show.

Filings with the government show that Perseus, a Washington-based fund headed by investment banker and publishing magnate Frank Pearl, unloaded 1.15 million shares of

Esperion Therapeutics

(ESPR) - Get Report

and 1.1 million shares of

Aksys

(AKSY)

during the first half of this year.

The selling by Perseus, which claims a number of Washington power brokers, including former U.N. Ambassador Richard Holbrooke, on its board, coincided with a triple-digit percentage runup in the prices of both stocks.

Perseus also was selling at the same time Sacane's $400 million Durus Capital Management hedge fund was quietly becoming a majority shareholder in both Aksys and Esperion -- buying a total of 17 million shares in the two companies while selling only 1.7 million. Sacane has called the purchases "inadvertent" in his

Securities and Exchange Commission

filings.

The Runup

Some on Wall Street contend that Sacane's buying in the thinly traded shares could have helped prop up their price (though no formal allegations to that effect exist). In fact, from Jan. 1 through June 30, shares of Aksys, a dialysis machine manufacturer, rose from $5.30 to $12.90, while shares of Esperion, a drug manufacturer, climbed from $7.10 to $19.43. Both increases easily eclipsed the gains in comparable indices.

The timing of stock trades are of interest because for several years Sacane had been a Perseus portfolio manager and also managed the Perseus-Soros BioPharmaceutical Fund, a $400 million joint venture between Perseus and Soros Fund Management. Several sources said Sacane, who started Durus in November 2001, formally severed his ties with Perseus and the Perseus-Soros fund at the end of 2002.

"It would raise your eyebrows if someone with a prior relationship is getting out at a time that a stock is moving up," said Scott Berman, a partner with Brown Rudnick Berlack Israels, who represents a number of hedge fund investors who are suing their former managers. "It would lead me to want to investigate anything further."

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From January to June, Sacane and Perseus virtually drove the trading activity in the two small-cap stocks. Between them, they accounted for more than 45% of the two issues' entire volume, according to Nasdaq Stock Market records.

Sacane's trading activities in the two small stocks have been the subject of controversy ever since he revealed in late July that his Connecticut hedge fund had amassed a 77% equity stake in Aksys and a 33% ownership stake in Esperion, but didn't publicly disclose that fact until months later.

Durus' Wall Street critics have been reluctant to accept its tale of "inadvertent" purchases, which they contend would represent gross incompetence uncharacteristic of a savvy money runner.

A hedge fund manager who didn't want to be identified said that on the surface, the trading in the two stocks has to be considered "suspicious" and could be evidence of something more unsavory.

Guns and Money

Sacane, already facing a lawsuit from Aksys over his fund's unusual trading activity, appears to be gearing up for a wave of litigation and possibly regulatory inquiries. This week, he replaced his longtime corporate lawyer, William Natbony, with hardnosed trial attorney Matthew Dontzin, one of the lawyers for Def Jam Records chairman Lyor Cohen.

Perseus declined to comment on its trading activities or the controversy surrounding Sacane. A spokesman for Sacane said he had "no knowledge or involvement regarding Perseus' trading decisions after he left in late 2002." Sacane's lawyer did not return several telephone calls.

It's possible that Perseus, in dumping shares of Aksys and Esperion, simply wanted to book a profit from the big runup in the two stocks. Some of the shares sold may have been ones held by the joint Perseus-Soros fund, in addition to shares separately held by other Perseus investment funds.

It's impossible to say just how much money Perseus generated from unwinding its positions in Aksys and Esperion. That's because it's not known at which prices it acquired and sold those shares.

But a rough estimate reveals that Perseus, if it sold most of its shares at the midway point in the runup in both stocks, could have generated proceeds of $25 million.

The changes in Perseus' holdings in the two stocks come from its Form 13-F filings, which must be filed each quarter by all investment mangers with more than $100 million in stocks. Perseus filed its most recent Form 13-F this week. Form 13-F filings do not report how much a fund has made from selling a stock.

At the beginning of the year, Perseus owned 1,134,881 shares of Aksys valued at about $6 million. The fund, meanwhile, owned 1,450,200 shares of Esperion valued at $10.3 million. As of June 30, Perseus reported owning just 32,881 shares of Aksys and 300,000 shares of Esperion.

Perseus also has sold a huge chunk of shares in

Allos Therapeutics

( ALTH), a company in which Durus owns a 20% equity stake. Through June, Perseus, which owned a 13% equity stake in the company, sold 245,000 shares.

One thing is certain: Perseus picked a good time to unload its shares. The prices of both Aksys and Esperion have dropped sharply since the scandal with Sacane broke.

As of Tuesday, shares of Aksys were trading around $8.60 and Esperion was selling around $13.80.