LawFuel.com – United States Attorney – Southern District of New York
FOR IMMEDIATE RELEASE CONTACT: U.S. ATTORNEY’S OFFICE
NOVEMBER 2, 2010 ELLEN DAVIS,
84-2720, 2715
Allegedly Illegal, Inside Tips At Time of Fatality And Other
Problems In Clinical Drug Trial Allow Hedge Fund To Avoid $30
Million In Trading Losses
PREET BHARARA, the United States Attorney for the
Southern District of New York, and JANICE K. FEDARCYK, the
Assistant Director-in-Charge of the New York Office of the
Federal Bureau of Investigation (“FBI”), announced today the
arrest of YVES BENHAMOU, a citizen and resident of France, on
charges of engaging in an insider trading scheme in which he used
his dual roles as an adviser on a clinical drug trial and as a
private, paid consultant to provide material, nonpublic
information about the drug trial’s progress to a portfolio
manager of a hedge fund group (the “Hedge Fund”). The Hedge Fund
then used that information to avoid approximately $30 million in
losses.
Manhattan U.S. Attorney PREET BHARARA said: “Benhamou
is alleged to have abused his position as a medical doctor by
illegally tipping off a hedge fund so it could reap a $30 million
windfall. As charged, by profiting from his sensitive position
and providing the hedge fund an unfair advantage, Benhamou
undermined the integrity of the securities market and sold out
his employer. This Office, along with the FBI and the Securities
and Exchange Commission, will continue to pursue professionals of
all stripes whose greed motivates them to corrupt the market and
betray the companies they advise.”
FBI Assistant Director-in-Charge JANICE K. FEDARCYK
said: “Dr. Benhamou was the quintessential insider, providing
non-public information about the company for which he worked to a
hedge fund holding millions of shares in the company. Insider
information about the clinical trials of Albuferon was invaluable
to the hedge fund, but passing it along wasn’t fair, and it
wasn’t legal.”
According to the two-count criminal Complaint filed in
Manhattan federal court late yesterday:
YVES BENHAMOU is a citizen of France and a medical
doctor with an expertise in hepatitis treatment. During the
scheme, BENHAMOU worked for Human Genome Science, Inc. (“HGSI”),
on a steering committee (the “Steering Committee”) that oversaw
the clinical trial of Albuferon, a drug being tested for its
potential to treat the liver disease Hepatitis C. HGSI was a
biopharmaceutical company, whose common stock is quoted on the
NASDAQ under the ticker symbol HGSI. At the same time that
BENHAMOU served as a member of the Steering Committee and worked
for HGSI, in exchange for a stream of payments, BENHAMOU
consulted with hedge funds and other investors who purchased and
sold securities in the healthcare sector, including the Hedge
Fund.
From November 2007 through January 2008, a
co-conspirator (“CC-1”) worked for the Hedge Fund as a portfolio
manager for healthcare funds with the authority to cause the
Hedge Fund to sell its shares of HGSI.
On multiple occasions, as a result of his position on
the Steering Committee, BENHAMOU had access to certain non-public
information about serious adverse events during the clinical
trial of Albuferon, including information about a fatality and
the occurrence of lung disease in another patient. BENHAMOU
communicated with CC-1 immediately after receiving the
information when it was still not public. As a result of those
communications, CC-1 then directed a trader at the Hedge Fund to
sell the Fund’s shares in HGSI.
By selling more than 6 million shares of HGSI before
disclosure was made to the public about certain adverse events,
the Hedge Fund avoided losses totaling approximately $30 million.
* * *
BENHAMOU, 50, of Neuilly-sur-Seine, France, was
arrested yesterday afternoon in Boston, Massachusetts, and is
expected to be presented this morning before a U.S. Magistrate
Judge in Boston federal court.
BENHAMOU is charged with one count of conspiracy to
commit securities fraud and one count of securities fraud for his
role in the insider trading scheme. He faces a maximum sentence
of five years in prison on the conspiracy charge and 20 years in
prison on the securities fraud charge.
Mr. BHARARA praised the efforts of the Federal Bureau
of Investigation. He also thanked the Securities and Exchange
Commission for its assistance in the investigation. He added
that the investigation is continuing.
Assistant U.S. Attorneys PABLO QUIÑONES and REED
BRODSKY are in charge of the prosecution.
The charges contained in the Complaint are merely
accusations and the defendant is presumed innocent unless and
until proven guilty.
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