LITIGATION RELEASE No. 17958 / January 30, 2003
SEC CHARGES ACCOUNTING SUPERVISOR AT MASSACHUSETTS PHARMACEUTICAL COMPANY AND HIS FATHER WITH INSIDER TRADING
SECURITIES AND EXCHANGE COMMISSION v. TIMOTHY J. POTTER AND GEORGE R. POTTER (United States District Court for the District of New Hampshire, C.A. No. C-03-32-M)
The Commission today filed insider trading charges against George R. Potter and Timothy J. Potter of Bedford, New Hampshire, in connection with trading in the securities of Sepracor, Inc., a Marlborough, Massachusetts-based pharmaceutical company. According to the Commission's complaint, on October 18, 2000, Sepracor employee Timothy Potter tipped his father, George Potter, after learning that Eli Lilly and Company might terminate a license agreement with Sepracor. Minutes later, the Commission's complaint alleges, George Potter bought Sepracor put options. The next day, after Sepracor publicly announced the termination of the license agreement, he sold them, profiting by $55,172. According to the Commission's complaint, on April 18, 2001, George Potter transferred approximately the same amount --$55,000 -- to Timothy Potter's account.
The Commission's complaint alleges that Timothy Potter, a manager in Sepracor's accounting department, learned no later than October 18, 2000, that Eli Lilly and Company might terminate a license agreement with Sepracor concerning the development of a new version of Lilly's top-selling antidepressant, Prozac. According to the complaint, on October 18, Timothy Potter tipped his father about the potential termination, in breach of a duty he owed to Sepracor and its shareholders not to trade, or direct others to trade, in the company's securities while in possession of material, nonpublic information about the company. The Commission's complaint further alleges that George Potter, acting on the tip, purchased put options on Sepracor stock for $30,694 - in effect, betting that the price of Sepracor stock would fall.
As a result of the conduct described in the complaint, the Commission charged George Potter and Timothy Potter with securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, based on their illegal insider trading. The Commission's complaint seeks injunctive relief, disgorgement of the profits from their insider trading, plus prejudgment interest, and a civil monetary penalty of up to three times the amount of the profits from their insider trading.
The Commission acknowledges the assistance of the Chicago Board Options Exchange in the matter.
