Massachussetts: Hedge Fund Chief Profited From Inside Information
State: Hedge Fund Chief Profited From Inside Information [Boston Herald]
From Boston Herald (MA) (March 10, 2011)
March 10--Three doctors were allegedly paid hundreds of dollars an hour to help a Cambridge hedge-fund manager score inside information about a drug study by a local biotech company, Secretary of State William Galvin charged yesterday.
Galvin, whose office oversees the securities industry in Massachusetts, moved to shut down the hedge fund, Risk Reward Capital Management, run by James A. Silverman. Galvin's office said Silverman contracted with a consulting firm, Guidepoint Global LLC, to effectively feed him "non-public" information about clinical trials conducted by two drug firms, including Ariad Pharmaceuticals of Cambridge.
Galvin alleges Silverman parlayed the information into big profits, with trades that netted hundreds of thousands of dollars.
Peter Pendergast, Silverman's attorney, said Galvin's charges are "unfounded and reckless" and that Silverman will "vigorously defend (himself) against these baseless allegations."
The action against Risk Reward Capital comes amid federal probes of insider trading deals involving consulting firms nationwide. Galvin's complaint sheds more light on the high-stakes, behind-the-scenes maneuvering for information on drug developers.
According to Galvin's complaint, Silverman paid Guidepoint $80,000 a year to get critical information about Ariad and California-based Questcor Pharmaceuticals.
In 2009, Silverman, with Guidepoint acting as a conduit, allegedly met with three doctors -- all of them "investigators'' on a cancer-drug trial being conducted by Ariad -- about how the research was going, Galvin's office charged. All three of the doctors, whose identities were withheld, had signed non-disclosure agreements with Ariad.
Galvin said the docs were paid $400, $600 and $1,000 per hour respectively after they met with Silverman about Ariad's clinical trials.
Maria Cantor, a vice president at Ariad, said her company condemns anyone who divulges non-public information about its drug trials. The doctors were not employees of Ariad, but rather outside contractors hired through payments to universities, she said.
"We're firmly opposed to outside clinical investigators who are under confidentiality agreements providing non-public information to investors," Cantor said.
Guidepoint said no complaints were filed against the firm by Galvin and that it "cooperated fully" in his probe.
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Posted: March 2011