Bristol-Myers Insider Arrest Followed Probe of Deal
By David Voreacos and Drew Armstrong - Aug 3, 2012 12:01 AM ET
U.S. regulators were so suspicious of the circumstances surrounding Gilead Sciences Inc. (GILD)’s Nov. 21 announcement it was buying Pharmasset Inc. for $11 billion that they opened an insider-trading investigation that day.
“The volume was huge and the deal premium was huge, so we looked at the underlying trading,” U.S. Securities and Exchange Commission attorney Mary P. Hansen said in a phone interview. “We were looking at anyone who bought shares.”
The probe, which the Justice Department joined, resulted yesterday in the arrest of Robert Ramnarine, a Bristol-Myers Squibb Co. (BMY) executive. Ramnarine, 45, was charged with making $311,361 in illegal profit by buying stock options in three companies targeted for acquisition. The SEC, which sued Ramnarine yesterday, is continuing its probe.
Ramnarine held high-level jobs including executive director of pensions and savings investments and assistant treasurer for capital markets. He helped the New York-based drugmaker evaluate whether to buy targeted companies, including Pharmasset, ZymoGenetics Inc. and Amylin Pharmaceuticals Inc. (AMLN), according to the Federal Bureau of Investigation arrest complaint.
As he conducted due diligence on pension and savings plans of those companies, he bought options in all three, violating a duty not to profit from inside information, the FBI said. Ramnarine was released yesterday on a $250,000 bond after appearing in federal court in Newark, New Jersey. His lawyer, assistant federal public defender Peter Carter, had no comment.
‘Apparent Epidemic’
“We are concerned about the apparent epidemic of insider trading involving the securities of pharmaceutical and health- care companies,” Daniel M. Hawke, chief of the SEC’s Market Abuse Unit, said in a phone interview. Ramnarine “was a well- compensated person, and it’s alarming that a person of his stature engaged in this kind of conduct.”
Bristol-Myers engaged in discussions from Oct. 13 to Nov. 17 of 2011 about potentially acquiring Pharmasset, which was developing oral drugs for hepatitis C, or HCV. The company, which had 82 employees, had a net loss of $91.2 million for the fiscal year ended Sept. 30 and no products on the market.
Pharmasset took offers in a “limited auction process” through its investment banking firm, Morgan Stanley Smith Barney LLC, according to the FBI complaint. Bristol-Myers withdrew on Nov. 17. On the next day, a Friday, Pharmasset closed at $72.67, with trading volume of 1.03 million shares.
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http://www.bloomberg.com/news/2012-08-03/bristol-myers-insider-arrest-followed-probe-of-deal.html
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