May 12, 2014 — Insiders with drug companies often come into possession of confidential insider information about the success or failure of a drug in clinical trials. But it is a crime to trade on that nonpublic information. To assist in the fight against illegal insider trading, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) of 2010 includes a whistleblower program. Tipsters who notify the Securities and Exchange Commission (SEC) about illegal insider trading may be rewarded for their courage in collaborating with the agency. Informants may receive up to thirty percent of the amount the government recovers, provided the amount exceeds $1 million.
Biopharmaceutical Executive Allegedly Tipped Friend to Disappointing Clinical Trial Results the Day Before Company Made Public Disclosure
A former biopharmaceutical company executive and two others have been charged by the SEC with insider trading on an illegal tip about the drug company’s highly touted new product, an experimental melanoma drug that was still under development.
Dr. Loretta Itri, the chief medical officer of Genta, Inc., came into possession of nonpublic information about the company’s disappointing clinical trial results for the new melanoma drug. Indeed, Itri had direct involvement in the drug trials at Genta, and was among the first to receive the unwelcome news.
Itri allegedly passed the bad news on to her friend, Dr. Neil Moskowitz, an emergency room doctor, the day before the scheduled public announcement of the drug trial results. Within minutes of receiving the tip, Moskowitz allegedly sold off his Genta stock and forwarded the information on to Mathew Cashin, a friend and patient. Genta’s share price took a tumble when the clinical trial results became public, dropping approximately 70 percent on the news. By dumping their securities in advance of the disclosure, Moskowitz and Cashin allegedly made around $139,000 in illegal gains.
Both Moskowitz and Cashin were named along with Itri in the SEC’s insider-trading action. The settlement would require return of the ill-gotten profits and require all three to pay a civil penalty.
Biopharmaceutical Insiders Notify SEC of Insider Trading
Company insiders who discover insider trading violations need to understand the Dodd-Frank whistleblower process before they come forward. The SEC fraud attorneys at Waters & Kraus have the experience necessary to protect whistleblowers’ interests in insider trading cases. Contact us by email or phone our qui tam lawyers at 855.784.0268 to learn how we can assist you.