This week, a chemist with the United States Food and Drug Administration was arrested and charged for multiple insider trading offenses. The chemist is accused of committing securities fraud by using his access to the FDA database to buy and sell stock ahead of FDA drug approvals.
According to the indictment, the chemist, who had been employed with the FDA since 1996, accessed confidential documents to learn whether or not the FDA would approve new pharmaceutical products. He then bought and sold shares ahead of the public approval or disapproval announcement.
The chemist allegedly purchased shares of stock in pharmaceutical manufacturers' companies ahead of 19 announcements of drug approvals, and sold company stock ahead of eight negative announcements. The SEC cites an example in which the chemist allegedly purchased more than 45,000 shares of Clinical Data stock before the FDA approved one of the company's antidepressant medications. After the announcement, stock jumped more than 67 percent, at which time the chemist sold his shares, allegedly earning a profit of almost $400,000 in less than 15 minutes.
The chemist and his son, who allegedly conspired on the fraud scheme, reportedly earned more than $3.6 million in fraudulent profits. The funds were placed in five bank accounts, one of which was under the name of the chemist's 84-year-old mother who lived in China. The pair then allegedly used the funds to purchase cars, go on vacations, and pay credit card bills.
The pair has been charged with several white collar crime offenses, including securities fraud, wire fraud and conspiracy.
Source: Financial Times, "FDA chemist charged with insider trading", Shannon Bond, 29 March 2011
