US doctor accused of hedge fund insider trading
An Ivy League-trained physician who became a health care investment analyst surrendered Wednesday on charges that accuse him of evading $30 million in losses for a hedge fund by obtaining confidential information from a French doctor about clinical liver disease drug trials.
Joseph Skowron III, of Greenwich, Connecticut, was charged with conspiracy to commit securities fraud, securities fraud and conspiracy to obstruct justice in a criminal complaint unsealed Wednesday in U.S. District Court in Manhattan. He formerly worked at FrontPoint Partners LLC, a hedge fund.
His arrest came two days after the French doctor, Yves Benhamou, pleaded guilty in a cooperation agreement with prosecutors to conspiracy to commit securities fraud, two counts of securities fraud, conspiracy to obstruct justice and making false statements. He had been charged in November.
Defense attorney James Benjamin said he had no immediate comment on the charges against Skowron, who was to make an initial appearance in court Wednesday.
Authorities said Benhamou was widely known in Europe and the United States as an expert in the treatment of hepatitis C.
The FBI said Benhamou worked as a consultant to Human Genome Science Inc., a biopharmaceutical company, on clinical drug trials evaluating the safety of the drug Albuferon for the treatment of chronic hepatitis C. Albuferon is the commercial name for a drug the company developed and planned to market with Novartis AG, a Switzerland-based pharmaceutical company.
Skowron learned inside information from Benhamou after meeting him in April 2006 at a Vienna, Austria, conference staged by the European Association for the Study of the Liver, the FBI said in a complaint.
They met again at the group's annual conference in Barcelona, Spain, and yet again at the annual conference of the American Association for the Study of Liver Diseases in Boston.
According to court papers filed against Skowron, he began giving cash payments to Benhamou in 2007, including 5,000 euros in an envelope in Skowron's hotel suite in Barcelona in April 2007 and $10,000 in cash in a hotel bar in Milan, Italy, in April 2008.
The FBI said the payoff came when Benhamou began tipping Skowron in late 2007 about serious adverse effects that occurred with two patients involved in the Albuferon clinical trial. One of the patients later died.
The FBI said Skowron was tipped again a month later that part of the clinical trial was going to be discontinued. According to court papers, Skowron was able to sell all of his hedge fund's shares before the stock of Human Genome Science dropped 44 percent following the public announcement.
Authorities said Skowron met Benhamou in a Boston hotel after a lunch meeting and offered him a bag containing two stacks of U.S. currency as payment for the confidential information, but Benhamou did not accept the money.
The FBI said Skowron gave Benhamou the $10,000 in cash in April 2008 and told him to continue to tell securities regulators who were investigating suspicious trades that he had only discussed publicly available information with Skowron.
David M. Zornow, a lawyer for Benhamou, said in a statement Wednesday that his client "has acknowledged his serious mistakes in judgment and intends to live up to his obligations under his cooperation agreement."
He added: "Dr. Benhamou's conduct in this instance must fairly be considered in the overall context of his extraordinary contributions to his patients and to medical science."
Skowron studied at Vanderbilt University before he obtained his medical degree in 1998 from Yale University. He also earned a doctorate in cell biology from Yale before beginning his residency at Harvard University.
He was on the board of directors of the disaster relief agency AmeriCares Foundation, where his volunteer work had taken him to Kosovo, Cuba, India and Baton Rouge, Louisiana, after Hurricane Katrina.