United States v. Andrew S. Marks (United States District Court for the District of Massachusetts, No. 03-10297 (DPW) (D.Mass.)
The Commission announced today that, on January 12, 2004, a federal judge sentenced attorney Andrew S. Marks, of Wayland, Massachusetts, to a year and a day in prison in connection with insider trading charges brought by the U.S. Attorney for the District of Massachusetts. On October 3, 2003, Marks, formerly the highest-ranking attorney at Vertex Pharmaceuticals, Inc., a Cambridge-based biotechnology company, pled guilty to a one-count information filed by the U.S. Attorney for the District of Massachusetts charging him with unlawful insider trading in connection with his September 2001 sale of Vertex stock. The criminal information alleged that, on September 20, 2001, Marks learned 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 criminal 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 alleged, 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 criminal information alleged 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 charged Marks with criminal violations of the antifraud provisions of federal securities laws, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Marks was also sentenced to two years of supervised release following his incarceration, and to pay a $3,000 fine.
On December 3, 2002, the Commission filed a complaint against Marks in connection with the same conduct in Massachusetts federal court. The Commission's complaint alleged 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 that action, which is still pending, the Commission seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties, and further seeks an order barring Marks from acting as an officer or director of any publicly-traded company. For further information, see Litigation Release Nos. 17871 (December 3, 2002), 18360 (September 24, 2003) and 18409 (October 14, 2003).