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U.S. Securities and Exchange Commission


Litigation Release No. 18956 / November 2, 2004

SECURITIES AND EXCHANGE COMMISSION v. ANDREW S. MARKS, (United States District Court for the District of Massachusetts, No. 02 CV 12325 (JLT) (D.Mass.)


The Commission announced that, on October 25, 2004, a Massachusetts federal court, by consent, issued an order in an insider trading case enjoining Andrew S. Marks, of Wayland, Massachusetts, from violations of the antifraud provisions, and barring him from acting as an officer or director of a public company. Marks was also ordered to pay $53,000 in disgorgement. Marks is currently in federal prison serving a sentence of a year and a day as the result of a related criminal proceeding.

In its complaint, filed December 3, 2002, the Commission alleged that Marks, who at the time was Vertex's highest-ranking attorney, learned on September 20, 2001, that Vertex planned to announce the suspension of clinical trials of one of its promising drugs on September 24. According to the Commission's complaint, on September 21, Marks liquidated all of his Vertex stock despite having previously acknowledged in writing that the impending release would not be viewed favorably by Wall Street and that he should not sell his Vertex shares. The Commission alleged that, by selling his holdings prior to the company's public announcement on September 24, Marks avoided a loss of $105,999.

According to the Commission's complaint, at the time he traded, Marks was the designated attorney for employees to consult regarding compliance with Vertex's employee securities trading policy. In that capacity, the Commission alleged, Marks wrote Vertex's CEO an email on September 20, advising him to make sure that an employee who had requested permission to trade had no knowledge of the impending press release. In the e-mail, Marks wrote:

I guess that I am troubled about any employee trading prior to that release because it is likely to have an effect on the stock (looks like I can't sell any shares) and, depending on the degree of that effect, could create the perception of insider trading.

On September 21, less than 24 hours after writing this email to the CEO, the Commission alleged, Marks sold 20,900 shares of Vertex at an average price of $22.81 per share, receiving $476,765. Vertex announced its decision to terminate clinical trials at approximately 7:10 a.m. on September 24. Vertex's shares closed that day at $17.74, down $5.33 from the previous close on volume of 9.8 million shares, more than eight times average daily volume.

In its complaint, the Commission alleged that Marks traded in breach of a fiduciary duty to Vertex and its shareholders not to trade in the company's stock while in possession of material, nonpublic information about the company. As a result of the conduct described in the complaint, the Commission charged Marks with violations of the antifraud provisions of federal securities laws, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933. The order holds Marks liable for disgorgement of $105,999, the full amount sought in the Commission's complaint, but waives payment of all but $53,000 based on sworn financial information that Marks submitted to the Commission. In addition, pursuant to an ancillary Commission administrative proceeding, Marks has been suspended from appearing or practicing before the Commission under Rule 102(e)(2) of the Commission's Rules of Practice.

On October 3, 2003, in the related criminal action, Marks had pled guilty to a one-count information filed by the U.S. Attorney for the District of Massachusetts charging him with unlawful insider trading in connection with his sale of Vertex stock. On January 12, 2004, a federal judge sentenced Marks to a year and a day in prison for his conduct.

For further information see Litigation Rel. Nos. 17871 (December 3, 2002), 18360 (September 24, 2003), 18409 (October 14, 2003), and 18548 (January 21, 2004) and Exchange Act Release No. 50432 (September 23, 2004).


Modified: 11/02/2004