U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19528 / January 12, 2006
Securities and Exchange Commission v. Thomas J. Bucknum, United States District Court for the District of Massachusetts, Civil Action No. 06-10065 PBS
SEC FILES SETTLED INSIDER TRADING ACTION AGAINST FORMER GENERAL COUNSEL OF BIOGEN IDEC INC.
The Securities and Exchange Commission filed a settled enforcement action today in U.S. District Court for the District of Massachusetts, charging Thomas J. Bucknum with insider trading in the stock of Biogen Idec Inc., a biotechnology company located in Cambridge, Massachusetts. Bucknum was Biogen’s general counsel until he resigned in March 2005.
The Commission’s complaint alleges that on the morning of February 18, 2005, Bucknum told his broker that he wanted to exercise options to purchase 89,700 shares of Biogen stock and sell those shares. The broker understood from that conversation that Bucknum wanted to sell the shares at a price of $68 per share or better. Biogen’s trading policies required that Biogen’s legal department had to approve Bucknum’s trade and Bucknum’s broker therefore proceeded to contact Biogen for the necessary clearance before making the trade. Meanwhile, at approximately noon that day, Bucknum attended a meeting at which he learned material, non-public information that was likely to have a negative impact on Biogen’s stock price. Specifically, Bucknum learned that a patient participating in a clinical trial of Biogen’s multiple sclerosis drug, Tysabri, had been diagnosed with progressive multifocal leukoencephalopathy (PML), a rare and often-fatal brain disease, and that another patient participating in a Tysabri clinical trial had an unconfirmed PML diagnosis. The Commission’s complaint alleges that, after the noon meeting, at approximately 1:30 p.m., Bucknum had a second conversation with his broker’s associate during which Bucknum instructed the associate to proceed with the sale of his 89,700 shares at the market price, which was then around $67 per share. Bucknum’s shares were sold shortly thereafter.
According to the Commission’s complaint, ten days later, prior to the opening of the market on February 28, 2005, Biogen and its development partner announced that they were suspending the marketing of Tysabri because of the confirmed and unconfirmed PML diagnoses. Biogen’s stock price had closed at $67.28 per share on the previous day. On the day of the announcement, Biogen’s stock price closed at $38.65 per share. This was a decline of $28.63 per share, or more than 42%. By selling shares of Biogen stock before the stock price fell, Bucknum reaped a substantial profit.
The Commission’s complaint charges Bucknum with violations of the anti-fraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, based on his illegal insider trading. The Commission’s complaint alleges that Bucknum breached a fiduciary duty he owed to Biogen and its shareholders when he sold Biogen stock while in possession of material, non-public information concerning the confirmed and unconfirmed PML diagnoses.
To settle the Commission’s charges, Bucknum has consented, without admitting or denying the allegations in the Commission’s complaint, to the entry of a final judgment permanently enjoining him from committing future violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Bucknum also has agreed to pay disgorgement in the amount of $1,938,465, pre-judgment interest thereon in the amount of $102,005, and a civil penalty of $969,232, for a total payment of $3,009,720. Finally, Bucknum will be prohibited from acting as an officer or director of any publicly-traded company for a period of five (5) years from the date of the entry of the judgment.