Litigation Release No. 18360 / September 24, 2003
United States v. Andrew S. Marks, (United States District Court for the District of Massachusetts, No. 03-10297 (DPW) (D.Mass.)
U.S Attorney Files Criminal Insider Trading Charges Against Former High-Ranking Attorney At Cambridge Biotech Company
The Commission announced today that, on September 9, 2003, the U.S. Attorney for the District of Massachusetts filed a one-count Information charging Andrew S. Marks, of Wayland, Massachusetts, with unlawful insider trading in connection with his September 2001 sale of stock in Vertex Pharmaceuticals, Inc., a Cambridge-based biotechnology company. The Information 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 Information, 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.
According to the Information, at the time he traded, Marks was the designated attorney for employees to contact regarding compliance with Vertex's employee securities trading policy. In that capacity, the Information 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 Information, Marks' email went on to say:
. . . I guess 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 Information 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 Information, Marks traded in breach of a fiduciary duty not to trade in Vertex's stock while in possession of material, nonpublic information regarding Vertex. As a result of the conduct described in the Information, the U.S. Attorney has charged Marks with violating the antifraud provisions of federal securities laws, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
On December 3, 2002, the Commission filed a Complaint against Marks in the United States District Court for the District of Massachusetts, alleging that Marks violated 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 in connection with the same trades that are the subject of the Information. The Commission's Complaint seeks injunctive relief, disgorgement, plus prejudgment interest, and civil penalties andseeks an order barring Marks from acting as an officer or director of any publicly-traded company. That litigation is currently pending. For further information, see Litigation Release No. 17871.