U.S. Securities and Exchange Commission
Litigation Release No. 17871 / December 3, 2002
SEC Charges High-Ranking Attorney at Cambridge Biotech Company with Insider Trading
Securities and Exchange Commission v. Andrew S. Marks (United States District Court for the District of Massachusetts, No. 02 CV 12325 (JLT) (D.Mass.)
The Commission announced today that it has filed insider trading charges against Andrew S. Marks, of Wayland, Massachusetts, in connection with his September 2001 sale of stock in Vertex Pharmaceuticals, Inc., a Cambridge-based biotechnology company. The Commission's complaint alleges that Marks, who at the time was Vertex's highest-ranking attorney, learned on September 20, 2001 that Vertex planned to announce the suspension of clinical trials of one of its promising drugs on September 24. According to the Commission's complaint, on September 21, Marks liquidated all of his Vertex stock despite having previously acknowledged in writing that the impending release would not be viewed favorably by Wall Street and that he should not sell his Vertex shares. The Commission's complaint alleges that, by selling his holdings prior to the company's public announcement on September 24, Marks avoided a loss of $105,999.
According to the Commission's complaint, at the time he traded, Marks was the designated attorney for employees to consult regarding compliance with Vertex's employee securities trading policy. In that capacity, the complaint alleges, Marks wrote Vertex's CEO an email on September 20, advising him to make sure that an employee who had requested permission to trade had no knowledge of the impending press release. According to the Commission's complaint, Marks' email went on to say:
I guess that I am troubled about any employee trading prior to that release because it is likely to have an effect on the stock (looks like I can't sell any shares) and, depending on the degree of that effect, could create the perception of insider trading.
The Commission's complaint alleges that, on September 21, less than 24 hours after writing this email to the CEO, Marks sold 20,900 shares of Vertex at an average price of $22.81 per share, receiving $476,765. According to the Commission's complaint, Vertex announced its decision to terminate clinical trials at approximately 7:10 a.m. on September 24. Vertex's shares closed that day at $17.74, down $5.33 from the previous close on volume of 9.8 million shares, more than eight times average daily volume.
The Complaint alleges that Marks traded in breach of a fiduciary duty to Vertex and its shareholders not to trade in the Company's stock while in possession of material, nonpublic information about the Company. As a result of the conduct described in the Complaint, the Commission has charged Marks with violations of the antifraud provisions of federal securities laws, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933. The Commission's Complaint seeks injunctive relief, disgorgement,plus prejudgment interest, and civil penalties and seeks an order barring Marks from acting as an officer or director of any publicly-traded company.
The Commission staff acknowledges the assistance of the NASD Regulation, Inc., in connection with this investigation.