A Pfizer ($PFE) deal is at the center of another round of insider trading charges. This time, the buyout is Pfizer’s 2010 King Pharmaceuticals deal, and it’s a lawyer who allegedly told secrets.
Call it TUI, talking under the influence. According to the federal indictment, Robert Schulman, an attorney at Hunton & Williams at the time, drank a few glasses of wine and blabbed to an investment adviser.
As a patent lawyer for King, Schulman had info about the pending deal. The investment adviser, Timor Klein of Klein Financial Services, was in a position to help Schulman profit from it--and reap some financial rewards himself.
According to the U.S. Attorney’s Office for the Eastern District of New York, the two men and Klein’s firm together scored $400,000 by snapping up King shares in advance of the deal announcement and selling them immediately after it went public.
The two men face charges of securities fraud and conspiracy. The maximum sentence is 20 years in prison, but insider trading schemes tend to yield less onerous penalties.
Schulman “violated the trust and confidence of his client for personal gain by passing along his client’s sensitive and economically valuable information,” U.S. Attorney Robert L. Capers said in a statement. Klein “exacerbated this crime by using the fraudulently-obtained information to trade in a number of his clients’ accounts.”
Klein pleaded not guilty Wednesday afternoon, Bloomberg reports, and was freed on $100,000 bond. “We are extremely disappointed by the government’s decision to charge Mr. Klein,” his lawyer, Christopher Bruno, told the news service.
Schulman was scheduled to be arraigned Wednesday in Alexandria, VA.
A broker who also was involved in the alleged scheme, Michael Schectman, was charged separately and pleaded guilty in 2014, Bloomberg says. He has not yet been sentenced.
The indictments follow another round where Pfizer’s dealmaking delivered insider profits. A former Pfizer supply chain employee, Michael Maciocio, gleaned info about possible acquisitions as part of his job, and he fed that information to a broker friend, David Hobson, formerly of Oppenheimer & Co. ($OPY). Hobson was indicted on securities charges for allegedly acting on that information. Maciocio pleaded guilty to related charges.
Pfizer’s not the only Big Pharma whose M&A activities have spawned insider trading charges. A former Merck & Co. ($MRK) employee was implicated in an insider trading scheme in 2014; the Merck finance analyst allegedly shared intelligence about the company’s acquisition targets with a former classmate. And before that, a former Bristol-Myers Squibb ($BMY) pension executive used internal M&A info to profit on stock trades.
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