U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE No. 18097 / April 22, 2003
NEW HAMPSHIRE MAN PLEADS GUILTY TO CRIMINAL INSIDER TRADING CHARGES
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 announced today that, on April 18, 2003, George R. Potter of Bedford, New Hampshire, pleaded guilty to a criminal information charging him with conspiracy to commit insider trading. Potter acknowledged that in October 2000, his son, Timothy Potter, disclosed to him confidential information about an agreement between Eli Lilly & Co., Inc. and Sepracor, Inc. concerning their joint development of a new drug. At the time of the trade, Potter's son was employed as a manager in the accounting department of Sepracor, a Marlborough, Massachusetts-based pharmaceutical company. Potter admitted that he then used the information to trade in Sepracor securities and later transferred the resulting profit to his son.
At the plea hearing, Potter admitted that, on October 18, 2000, his son disclosed to him material, nonpublic information relating to Sepracor's relationship and agreement with Lilly. Potter further admitted that, later that day, on the basis of the information he received from his son, he purchased Sepracor "put" options. When Sepracor publicly announced the termination of the agreement with Lilly the following morning, Sepracor's stock price plummeted while the value of Sepracor put options soared. Shortly after the announcement, Potter sold the Sepracor put options, generating an overnight profit of more than $55,000. He admitted that he later transferred that profit to his son. Potter also admitted that he made false and misleading statements to the Commission staff during its investigation into his trading.
Potter will be sentenced on July 22, 2003. His son, Timothy Potter, also of Bedford, New Hampshire, was charged in an indictment handed down on January 30, 2003, and his case is pending.
Earlier on January 30, 2003, the Commission filed a civil fraud case charging George Potter and Timothy Potter with insider trading based on George Potter's October 18, 2000 purchase of Sepracor options. According to the Commission's complaint, by their conduct, the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission's complaint seeks injunctive relief, disgorgement of the profits from their insider trading, plus prejudgment interest, and civil monetary penalties against each of the defendants of up to three times the amount of their profits from their insider trading. For further information, see Litigation Releases No. 17958 (January 30, 2003) and No. 17970 (February 5, 2003).