Six years ago, over glasses of wine, it is alleged that a client provided an investment broker information that Pfizer Inc. was going to acquire King Pharmaceuticals Inc. That little tip has led to accusations of insider trading that can land both men in prison for 20 years each.
The deal between Pfizer and King Pharmaceuticals was a $3.6 billion deal. The investment broker’s client learned of the deal while it was pending because he represented King Pharmaceuticals’ interest in the acquisition.
Once the client passed on the information the broker during a weekend visit in 2010, the broker made trades based on that information. The U.S. Securities and Exchange Commission assert that a few glasses of wine, shared information, and trades using that insider information involved both men in a lawsuit filed in 2013.
The broker purchased more than $585,000 in stocks for his clients and himself. He advised the knowledgeable client to make purchases of options and stocks. When the acquisition was announced, the broker sold the shares he had purchased for a profit of more than $328,000. The informed client netted more than $15,000 and the broker netted more than $8,000.
Another man who was involved in the insider trading has pleaded guilty to the charges against him. He hasn’t been sentenced.
This case comes at a time when a case before the U.S. Supreme Court could change how insider trading is prosecuted. That fact alone led to a person involved in the case being shocked that there were criminal charges filed in the case.
Anyone who is accused of securities fraud and related charges should learn about how all applicable laws could be used in his or her defense. This might provide them with ideas about options for a defense.
Source: Bloomberg, “Boozy Tip on Pfizer Deal Leads to Insider Trading Charges,” Chris Dolmetsch, Aug. 10, 2016