Tuesday, April 24, 2007
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.