Friday, February 17, 2006
The U.S. Attorney's Office for the District of Massachusetts announced that Michael K.C. Tom entered a guilty plea to five counts of insider trading. Tom, who was a co-founder and manager of the hedge fund Global Time Capital Growth Fund, received information from an analyst at Citizens Bank that the bank was completing its due diligence before purchasing a Cleveland-based bank. A press release issued by the U.S. Attorney's Office (here) states:
Armed with this inside information, and with his knowledge of the banking industry, TOM was able quickly to narrow the possible targets to the eventual target, Charter One Financial. Over the next few business days, TOM traded aggressively in Charter One securities, making fifty-two purchases of either common stock or call options contracts. He made these trades in his own name, as well as on behalf of GTC Growth Fund and some of his relatives.
Tom's purchases of Charter One securities resulted in profits of approximately $750,000. The Citizens Bank analyst and her husband entered guilty pleas in November 2005 to insider trading charges.
Meanwhile, the SEC filed a settled civil securities fraud suit against Dr. Sanjiv Agarwala, an Associate Professor at the University of Pittsburgh Medical Center and the director of its melanoma program, for insider trading. Dr. Agarwala was a consultant for Maxim Pharmaceuticals, Inc. in 2004 when it conducted successful clinical trials on the drug Ceplene to treat two forms of cancer while another trial was unsuccessful. According to the SEC's Litigation Release (here):
[I]n April, May, and September 2004, while aware of the material nonpublic information, Agarwala used his father's brokerage account to purchase or sell Maxim stock before the public announcements of that information. Agarwala's profits and loss avoided from his repeated insider trading totaled $14,784. By engaging in such trading, Agarwala breached his duty to Maxim not to trade on the basis of confidential information.
In addition to disgorging his gains and losses avoided, Dr. Agarwala paid almost a double civil money penalty of $29,568. (ph)