Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, April 24, 2007

Insider Trading Charges Against Spouse of Amgen VP

The Commission today announced the filing of securities fraud  charges against the husband of an Amgen vice president for engaging in insider trading in the stock of Abgenix,  Inc.,  a  biopharmaceutical  company that was acquired by Amgen in April 2006.  The Commission's complaint, filed on  April  23  in  federal  district court in Los Angeles, alleges that Gary K. Melton misappropriated confidential information from his  wife, Amgen's  vice  president  of  strategic  sourcing   and   procurement, regarding Abgenix when he purchased Abgenix stock days before  Amgen's acquisition of Abgenix was publicly announced. Melton realized illegal profits of $15,252 from his trades and  agreed  to  pay  approximately $31,000 to settle the charges.

The Commission's complaint alleges that in early November 2005, Melton and his wife discussed the publicly announced favorable results  of  a clinical trial for an antibody jointly developed by Amgen and Abgenix.  At the time, Melton commented to his wife that he might purchase  some Abgenix stock, to which his wife said nothing. Melton's wife  reported directly to Amgen's chief  financial  officer  and  attended  meetings where mergers and acquisitions were discussed.  A month later, according  to  the  complaint,  Melton's  wife  learned through her employment at Amgen that a public announcement of  Amgen's acquisition  of  Abgenix   was   imminent.   Recalling   her   earlier conversation with her husband, Melton's wife  instructed  him  not  to purchase Abgenix stock, the complaint alleges. The  complaint  further alleges that Melton understood his wife's unexplained  instruction  to mean that more favorable news about Abgenix was forthcoming, and  that Melton  knew,  or  was  reckless  in  not  knowing,  that  his  wife's instruction not to  purchase  Abgenix  stock  was  based  on  material nonpublic information she had acquired through her employment at Amgen and that he could not lawfully use such information for  his  personal benefit.

According to the complaint,  despite  his  wife's  admonition,  Melton nevertheless purchased 2,050 shares of Abgenix stock between  December 8 and 13, 2005. After the market closed on December  14,  2005,  Amgenand  Abgenix  issued  a  joint  press   release   announcing   Amgen's acquisition of Abgenix for $22.50 per share, which represented  a  54% premium on the closing price of Abgenix stock that  day.  On  December 15, 2005, Melton liquidated his Abgenix stock and realized an  illegal profit of $15,252.   To  settle  the  Commission's  charges,  Melton   consented,   without admitting or denying the allegations in  the  complaint,  to  a  final judgment permanently enjoining  him  from  future  violations  of  the antifraud provisions of Section 10(b) of the Securities  Exchange  Act of 1934 and Rule 10b-5 thereunder, and ordering him to pay $15,252  in disgorgement  of  his  illegal  trading  profits,   plus   prejudgment interest, and a civil penalty  in  an  amount  equal  to  his  trading    profits.

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