U.S. Securities and Exchange Commission
Litigation Release No. 18889 / September 17, 2004
SECURITIES AND EXCHANGE COMMISSION v. ERIC I. TSAO, Civil Action No. AW-03-1596 (D. Md.)
FORMER MEDIMMUNE EXECUTIVE SETTLES INSIDER TRADING CASE WITH SEC AND ENTERS GUILTY PLEA FOR FELONY SECURITIES FRAUD AND PERJURY
The Securities and Exchange Commission announced today that it has reached a settlement of its pending insider trading charges against Eric I. Tsao, a former executive at MedImmune, Inc., a biotechnology company based in Gaithersburg, Maryland. The Commission's complaint, originally filed on June 2, 2003, alleged that Tsao engaged in three separate episodes of insider trading between September 1999 and December 2001, from which he realized aggregate illicit profits of $146,850.00. The Commission's Complaint also alleged that when Tsao testified before the SEC staff during the investigation of this matter, he falsely denied having placed or authorized any of the relevant trades in two of the three separate instances of insider trading - and provided a false alternative explanation for the trading.
Without admitting or denying the allegations of the Complaint, Tsao consented to the entry of a Final Judgment against him that (i) permanently enjoins him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, (ii) bars him from acting as an officer or director of a public company, (iii) requires him to disgorge $146,850.00 in illicit profits, and $24,758.30 in pre-judgment interest thereon, and (iv) orders him to pay civil money penalties, pursuant to Section 21A of the Exchange Act, in the amount of $220,275.00 and a Remedies Act penalty, pursuant to Section 21(d)(3) of the Exchange Act, of $110,000.00. The Final Judgment permits Tsao to offset his payment of disgorgement and civil penalty by the corresponding amounts, if any, of restitution and criminal fine, respectively, he pays in connection with the parallel criminal proceeding described below. The Final Judgment is subject to the approval of the United States District Court.
Also today, in a related criminal proceeding, the United States Attorneys' offices for the District of Maryland and for the District of Columbia announced that Tsao -- in a proceeding held today before the Honorable Henry H. Kennedy, Jr., United States District Court Judge for the District of Columbia -- has plead guilty to one felony count of criminal insider trading and one felony count of perjury arising from false statements that Tsao made to the SEC staff during the investigation.
The Commission's complaint alleged that on each of three occasions, within days after learning that MedImmune was involved in confidential negotiations concerning a possible business combination with another public company - the first being U.S. BioScience, Inc., the second ImClone Systems, Inc., and the third Aviron - Tsao bought stock in the other company (and, in the case of ImClone, MedImmune stock as well). On each occasion, according to the complaint, Tsao bought the stock over the Internet in a securities account that, although nominally held by his parents in Taiwan, Tsao had opened, controlled, treated as his own, funded with his own assets, and used to pay his household expenses. The complaint also alleged that, after Tsao learned that NASD Regulation, Inc. ("NASDR") was investigating trading in one of the stocks at issue, he took steps to distance himself from this account, and later provided a false explanation of his trading to the SEC staff.
The Commission's complaint alleged as follows:
The Commission acknowledges the assistance of the United States Attorneys' Offices for the District of Maryland and for the District of Columbia, and the FBI in the investigation of this matter. The Commission also wishes to thank the National Association of Securities Dealers-Regulation for their assistance in this matter.