In what has to be the saddest case of insider trading ever, a Carlsbad, Calif., man will pay $23,761.65 to settle charges he traded in stock of Advanced Medical Optics in 2009 because his lawyer daughter took some M&A work home with her on a visit over the December holiday season in 2008.
You have to feel sorry for the unnamed daughter in the case, who spent the Hanukkah/Christmas and New Year period at her parents' house working frantically on disclosures for Abbott Labs (ABT)'s acquisition of AMO prior to the Jan. 12, 2009, announcement of the deal.
The SEC's suit says she would "park" herself at desks in common areas, her bedroom, and Goetz's home office, with her papers -- missing out on family time to work on the deal. Her dad read the papers without her knowledge and bought 900 shares of AMO stock at $8.79. The deal closed at $22/share, netting him $11,418.
Why insider trading is endemic in pharma
One management lesson here is that you cannot trust your parents at Xmas -- but then you knew that already.
In recent cases, insider trades at pharma companies have been done by an FDA official, investment banks and hedge funds, and lawyers. (It's always the bloody lawyers!) There has also been a healthy stream of unproven accusations that pharma management has spent a bit too much time on the phone with their brokers prior to big news.
The takeaway here is that drug companies have a special duty to educate their employees about the vagaries of insider trading law, which is more complicated than you'd think. The drug industry remains uniquely vulnerable to insider trading.
While all companies engage in periodic takeovers that bump and collapse stock prices suddenly, new product pipelines in pharmaceuticals are unusually unpredictable and can cause unexpected spikes and drops in prices. Clinical results, manufacturing setbacks and uncertain regulatory timetables all provide pivot points for stock trades. Companies with fewer than a dozen or so products -- and that's most drug companies -- can see their stock crushed or doubled on headlines about just one of their drugs.
You just don't see that kind of rollercoaster drama in the detergent or food business.
- How the FDA Brought Its Insider-Trading Scandal On Itself
- Cancer-Drug Maker Dendreon's New Foe: Man With One Share-- and Twitter
- Death of an Insider: R&D Chief Passes Before She Can Testify in Stock Fraud Case
- Insider Transactions and Delayed Disclosure: How a Diabetes "Blockbuster" Blew Up
- Guess Who's (Mostly) Not to Blame for Insider Trading in Pharma Stock?
- When Business Meets Religion: Why I Signed a Contract With the Mark of the Beast