U.S. Securities and Exchange Commission
Litigation Release No. 18750 / June 17, 2004
SECURITIES AND EXCHANGE COMMISSION v. THOMAS M. GIBSON, et al., United States District Court for the Northern District of Illinois, Eastern Division (Chicago), Case No. 02-C-7082 (J. Coar).
The Securities and Exchange Commission ("Commission") today announced that, on May 24, 2004, following a four-day trial, a jury in Chicago, Illinois, returned a verdict in favor of the defendant, Thomas M. Gibson. The Commission had charged that Mr. Gibson, 77, had engaged in insider trading in violation of the federal securities laws, specifically Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. During the relevant time period, Mr. Gibson was a member of the board of directors of Cell Pathways, Inc., a publicly-traded biotech company located in Horsham, Pennsylvania.
This action was filed on September 24, 2002 against Mr. Gibson, the Estate of Harry C. Krause and the heirs of Harry C. Krause in the U.S. District Court for the Northern District of Illinois as SEC v. Gibson, et al., No. 02-C-7082.
The Commission alleged that on September 20, 2000, Mr. Gibson learned the material, nonpublic information that the U.S. Food and Drug Administration had determined that it was not going to approve Cell Pathways' new drug application for its cancer drug, Aptosyn. The Commission alleged that immediately after receiving this information, Mr. Gibson tipped his friend, Harry Krause, and that Harry Krause then sold 22,000 shares of his Cell Pathways stock before the information became public. Mr. Krause was able to avoid losses of approximately $400,000 by selling his Cell Pathways stock on September 21, 2000, rather than on September 25, 2000 when the information became public and the stock price fell by approximately 70 percent.
Prior to trial, the Commission settled its claims against the Estate of Harry C. Krause and the heirs of Harry C. Krause for a payment by the Krause defendants in the amount of $150,000.
Securities and Exchange Commission v. Thomas M. Gibson, et al., No. 02-C-7082 (N.D. Ill.).