SEC Charges Biotech Employee, Two Stockbrokers With Insider Trading on Nonpublic Information About Pharmaceutical Trials and Merger
The Securities and Exchange Commission today charged three men living in California with insider trading in the stock and options of a biotechnology company where one of them worked.
The SEC alleges that Michael J. Fefferman learned material nonpublic information as senior director of information technology at Ardea Biosciences Inc. He tipped his brother-in-law Chad E. Wiegand in advance of major public announcements related to two pharmaceutical trials, a licensing agreement for a cancer drug, and eventually the acquisition of the company by AstraZeneca PLC. Wiegand, a stockbroker, purchased Ardea stock in various customer accounts based on the confidential information he received from Fefferman, and he tipped his friend and fellow stockbroker Akis C. Eracleous so he could similarly buy stock on behalf of his customers. The alleged insider trading resulted in illegal profits of approximately $530,000.
One of Eracleous’s customers, his cousin, has been named as a relief defendant in the SEC’s complaint for the purpose of recovering insider trading profits in his brokerage account. The cousin agreed to pay back the entire amount of illicit profits in his account totaling $219,175 in disgorgement and interest.
Fefferman, Wiegand, and Eracleous have agreed to settlements that are subject to court approval. Disgorgement, prejudgment interest, and penalties will be determined at a later date. Wiegand and Eracleous have agreed to be barred from the securities industry.
In a parallel action, the U.S. Attorney’s Office for the Southern District of California today announced criminal charges against Wiegand and Eracleous.
“As a corporate insider, Fefferman breached his duty to Ardea’s shareholders by tipping confidential information about significant corporate events before they were announced,” said Sharon B. Binger, Director of the SEC’s Philadelphia Regional Office. “Wiegand and Eracleous took unfair advantage of the investing public by trading on confidential company knowledge unknown to others.”
According to the SEC’s complaint filed in federal court in San Diego, the insider trading occurred from April 2009 to April 2012. The complaint charges Fefferman, Wiegand, and Eracleous with violating the antifraud provisions of the federal securities laws.
The SEC’s continuing investigation is being conducted by Patricia A. Paw, John S. Rymas, and Daniel Koster in the Philadelphia office. The case is being supervised by Brendan P. McGlynn, and the litigation will be led by David L. Axelrod and Michael J. Rinaldi. The SEC appreciates the assistance of the U. S. Attorney’s Office for the Southern District of California, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.