UPDATED: Ex-Pfizer employee who leaked M&A targets pleads guilty to insider trading charges

Wall Street

A former Pfizer employee leaked company secrets to a stock-trading buddy, and now they’re both caught in an insider trading crackdown.

Former Oppenheimer & Co. investment adviser David Hobson was arrested Friday on charges that he traded on inside info passed along by Michael Maciocio, a lifelong friend who had worked at Pfizer. Maciocio, a supply chain exec, pleaded guilty to related charges May 20.

The Justice Department disclosed the arrest and indictment Friday. Pfizer wasn’t named in the press release but the company confirmed Maciocio’s former employment. The company said it let Maciocio go after investigating his actions and determining that they violated Pfizer's conduct codes.

It’s not the first time a Big Pharma employee shared secrets with a stock-trading buddy--and probably won’t be the last. For instance, a former Merck & Co. employee was implicated in an insider trading scheme in 2014; the Merck finance analyst allegedly shared intelligence about the company’s acquisition targets with a former classmate. And before that, a former Bristol-Myers Squibb pension executive used internal M&A info to profit on stock trades.

M&A targets were at the center in this case, too--including the latest belle of the dealmaking ball, Medivation.

In its statement, Pfizer emphasized that Maciocio no longer works at the company, and that it's cooperating with the authorities on the case. "After identifying the potential improper conduct, Pfizer determined the employee’s actions breached the Company's policies on business conduct and terminated his employment," the company said.

Hobson allegedly used info on Pfizer’s takeover prospects to earn $187,000 on his own account and $145,000 for customers. Maciocio’s take was $116,000, the SEC said in a lawsuit.

Maciocio was a master planner in Pfizer’s Active Pharmaceutical Ingredient supply chain group, and as part of his job, he tracked manufacturing demands and capacity. He received information about potential deals that could affect those demands, and though the company’s name was not disclosed, he could typically figure it out through research, the Justice Department said.

After he did, he told Hobson, who executed stock trades accordingly. In addition to profiting off Medivation trades, Hobson also used Maciocio tip-offs about potential deals for Ardea Biosciences and Furiex Pharmaceuticals, the indictment alleges.

Hobson faces two conspiracy charges and two counts of securities fraud--and a maximum of 20 years in prison. He could also be fined up to two times the gains on his trades, the Justice Department said in a release. Maciocio pleaded guilty to similar charges with similar statutory penalties. Their individual sentences could vary substantially.

- see the Justice Department release
- get more from Reuters

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Editor's note: This story was updated with comments from Pfizer, and to emphasize that Michael Maciocio no longer works at the company.