Insider Trading: Escaping Detection Can Be Difficult
Insider trading has long been a staple of the Commission. Over the years the agency has honed its skills at fretting out those who trade for their personal enrichment, in violation of their obligations to the company and to the detriment of others in the market. Nevertheless, those with the opportunity at times gamble that they can escape detection. Perhaps; but the stakes are high and losing can have significant consequences.
Consider the cases that swirled around a Massachusetts based pharmaceutical company from events that took place in 2013 and 2014. As the firm developed its products it would receive information from the Food and Drug Administration. Until released to the public the information was inside information. Stated differently, no trading until after the FDA information was released to the public. Unfortunately, two employees and the husband of a third did not wait. None of the trades were huge, the type of outsized transaction that draws attention. Yet trading by the three spawned four insider trading cases. SEC v. Altvater, Civil Action No. 17-cv-1118 (D. Mass. Filed June 27, 2017); U.S. v. Altvater, No. 1:17-cr-10216 (D. Mass.); SEC v. Curran, Civil Action No. 7-cv-11179 (D. Mass. Filed June 27, 2017); SEC v. Dubuc, Civil Action No. 17-cv-1118 (D. Mass. Filed June 27, 2017).
Each case centers on trading in the shares of the Pharmaceutical Company prior to announcements by the FDA regarding the company. Defendant Harold Altvater is the husband of a firm employee from whom he is alleged to have misappropriated inside information, traded and reaped profits of over $100,000. Defendant Maureen Curran is the firm’s former Senior Director of Pharmacovigilance and Risk Management who is alleged to have traded after attending meetings with the FDA. She had profits of over $9,000. And, Defendant Susan Dubuc is the firm’s former Associate Director of Pharmacovigilance and Risk management. After receiving a blackout notice from the firm in advance of an FDA announcement, she tipped her relatives who traded and avoided losses of about $2,888.
The complaint in each civil case alleged violations of Exchange Act Section 10(b). Ms. Curran and Ms. Dubuc each settled with the SEC, consenting to the entry of a permanent injunction prohibiting future violations of the Section cited in the complaint. Ms. Curran also payed disgorgement of $9,420, prejudgment interest and a civil penalty equal to the amount of the disgorgement. Ms. Dubuc payed disgorgement of $2,888.10, prejudgment interest and a civil penalty equal to the amount of the disgorgement.
Mr. Altvater did not settle. He went to trial in a parallel criminal case brought by the U.S. Attorney’s Office for the District. In October 2018 a jury found him guilty on three counts of securities fraud. He was sentenced to serve eighteen months in prison followed by one year of supervised release. He was also ordered to pay $115,657 in forfeiture.
Last week Mr. Altvater settled with the Commission. He consented to the entry of a permanent injunction which precludes future violations of Exchange Act Section 10(b). He was also directed to pay disgorgement of $112,569. That amount is offset by the forfeiture order in the criminal case. See Lit. Rel. No. 24855 (July 24, 2020).
Video Program: “Securities Fraud, the Pandemic and Compliance: Protect Your OrganizationThe Many Faces of Securities Fraud,” August 6, 2020, 12:00 p.m. ET. Chair, Tom Gorman. Free registration, materials & CLE (here)