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U.S. Securities and Exchange Commission

U.S. Securities and Exchange Commission

Litigation Release No. 18846 / August 24, 2004

SEC v. John Patrucco, Case No. C 04-3515 WDB (N.D. Cal.)


The Securities and Exchange Commission announced that it has filed insider trading charges against the former Associate Director of External Reporting at VaxGen, Inc., a Brisbane, California biotechnology company. The defendant, John Patrucco, was responsible for preparing reports filed with the Commission disclosing to the public material information about VaxGen. The Commission alleges that Patrucco learned that the government had given VaxGen an important approval for one of its drugs, and then bought VaxGen stock before he prepared and filed the SEC report that disclosed the news to the public. Without admitting or denying the allegations, Patrucco has agreed to settle the enforcement proceeding by paying just over $20,000 in disgorgement, penalties, and prejudgment interest and by consenting to a permanent injunction against future securities law violations.

According to the Commission's civil complaint, Patrucco purchased 2,950 shares of VaxGen stock on the open market on May 22 and 23, 2003, based on his advance knowledge that the Food and Drug Administration had just approved VaxGen's Investigational New Drug application for a potential anthrax vaccine. The FDA's decision allowed VaxGen to begin clinical development of the vaccine through Phase I human clinical trials, one of the major milestones before the FDA can approve a drug for sale to the public. When the Company later announced the news on May 27, 2003 - in a press release and a report filed with the Commission and prepared by Patrucco as part of his SEC reporting duties - VaxGen's stock price rose nearly 70%. Patrucco sold the shares the following day, realizing a quick profit of nearly $8,000. Patrucco resigned from VaxGen in July 2003.

The Commission's lawsuit, brought in federal district court in San Francisco, charges Patrucco with trading on the basis of material, nonpublic information in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Under the settlement, Patrucco will pay $8,366.38 in disgorgement and prejudgment interest, and a $12,000 civil penalty, which is 1.5 times his illegal profit. In addition, the judgment enjoins Patrucco from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

The Commission acknowledges the assistance of the National Association of Securities Dealers (NASD) in this matter.

SEC Complaint in this matter



Modified: 08/24/2004