Monday, April 21, 2008

Another Interesting Cafepharma Question, here. . . .


A reader at Cafepharma asked another question -- my answer is apparently caught in the moderation que, at the moment, over there, so here it is:

Anonymous wrote:

when will the criminal case start on insider trading -

a) Never
b) 3077
c) Already settled

your answer ??

My answer:
"I doubt it is settled already -- that would require a public SEC filing, a report -- and we haven't seen any.

As to the individual officers/directors, I think proving a criminal (as opposed to civil) insider trading case -- at least, on the facts as we now know/understand them -- would be a tall order. I think to prove that crime, one would need to show far more than just "access" to the ENHANCE data, by those who traded prior to disclosure -- while in a purely civil case, this "access", plus the top-of-market prices, might be enough to convince a court to impose a civil penalty -- or at least, to extract a civil charge settlement in deferred prosecution/negotiations with the SEC, directly, in the weeks leading up to a trial, at some 2009 date.

It is quite difficult to say, as it is all very early in the process of finding out what evidence exists, beyond what is already known by the public.

I think it would be similarly difficult (based on the public documents, thus far) to prove that the "enterprise" conspired to conduct the August 2007 $3.8 billion offerings with specific intent to defraud. That does not mean it did not happen. It just means it would be very difficult to prove. Your mileage may vary. . . .
"

We may learn much more in the coming months that will render this polly-anna-ish and out-of-date, but right now, I really can't see the SEC filing [sincere thanks go to Anon. No. 2, in the comments hereto, for the suggested edit!] referring a criminal case, to the DoJ, on these facts. Not on what we know thus far.

3 comments:

Anonymous said...

Rain man,
What about the SGPpm stock? What was it? Why did the big boys own it and no one else? Why was it trading at $66 when SGP was in the teens? Why is it gone? Was this where all the Merck and Schering profits went? Your studious and considered reply is appreciated.

Anonymous said...

The SEC does not have authority to file criminal cases, only civil cases. Criminal cases are handled by the Justice Department.

rainnn said...

Anon. No. 2 -- you are correct -- but the DoJ almost always acts upon a referral from the SEC, of course. . . . good point, though.

And now, Anon. No. 1 -- I guess you must mean the 2004 Schering preferred. I really don't know much about it. It was redeemed, by its terms in 2007, I think. Now, The current 6% SGP-PB (issued in August 2007), Due 2010, trades at around $175 today. It is a bad bet, in my humble opinion.

To find out why, go get more information on that, at the Yahoo! message boards, here.

As ever, thanks for the comments, one and all!