I Was Reading Some Letter Briefs, Recently Filed in the Manson Litigation, Tonight. . . .

And a couple of things lept out at me -- I guess I hadn't fully appreciated them, before.

For example, it might interest readers to know that Dr. John Kastelein, the "P.I.", or Principal Investigator, on the ENHANCE study, and the man Schering-Plough turned to, on March 30, 2008, to present the full ENHANCE study results, at the American College of Cardiology (ACC) Conference that day, told The Wall Street Journal, on March 31, 2008 -- one day later -- that as far as he was concerned, the ENHANCE data was ready to be published (see item (ii), in the second paragraph on page 2 of that link) in March of 2007.

That's a full year earlier than when Schering actually did so.

More importantly, for Ms. Cox, personally -- her cashless exercises of options and simultaneous sales (netting north of $11 million) all occured after the date that the ENHANCE P.I., Dr. Kastelein, said he felt the data was "ready" for publication. But that publication didn't begin until January 14, 2008 -- and it wasn't completed until March 30, 2008. But Dr. Bots -- Schering's own expert in these matters -- had opined that the data were "fine" a full-year earlier.

Finally, that March 2007 date is a full four months before Schering-Plough officers, including Ms. Cox, and Mr. Hassan, caused Schering-Plough to sell $2.8 billion of equity, and mandatory convertible securities, to the public -- at $27.50.

Schering-Plough's common stock closed on the NYSE at $13.62, shortly after that ACC meeting [click to enlarge]:



Fascinatingly, the Arkansas Teacher Retirement Fund, a lead plaintiff in the Manson (Securities Act of 1933) federal putative class action litigation, can apparently prove that it bought the Schering common at the $27.50 public offering price, and can trace its purchase of the mandatory convertible preferred, to the offering's underwriters.

The issuer itself -- Schering-Plough -- has strict liability to the purchasers -- like the Arkansas Fund -- under the Securities Act of 1933 (there are essentially no defenses, other than that every statement made in the offering was literally free of any material omission -- see page 2 of this). In such a '33 Act "public offering" claim -- there is no need to prove "scienter", or "guilty knowledge", at all. But it seems there is plenty of it, anyway.

On the other hand, Ms. Cox's primary defense to the civil insider trading (an inference of scienter) will be to show that she "could not have known" about the ENHANCE results in April of 2007. The problem is that Dr. Kastelein was already meeting resistance to publishing the results, by then. Her biggest problem, though, I think, will be that by then, over on CafePharma (a board company officers were monitoring), anonymous people had written that ENHANCE was a "bust". Stick. A. Fork. In. Her. She's. All. Done.

Now, as the company's highest officer, director, and a signer of the offering documents, Mr. Hassan's only defense to personal liability on these Arkansas Fund claims, will be that "he could not have known" about the ENHANCE debacle, in August of 2007, even if he was "duly diligent" in asking after it.

During that period (August-September 2007), Dr. Kastelein was sending e-mails to (and getting profane internal replies(!) from) Schering and Merck officers, decrying the "lack of attention" being paid to finishing up the ENHANCE publication process -- getting the study published.

Mr. Hassan's "due diligence" most-certainly should have uncovered this state of affairs, given that Vytorin/Zetia were more than 60 percent of ALL the company's profitability, at that time.

I'd say he, and she, are both in a lot of trouble. It is just taking time for the whirlwind to fully-form.

Here's the letter I mentioned in the title of this post -- it is a PDF file. [I'll likely come back, late-afternoon, tomorrow -- and fill in various links to all the salient time-line items mentioned above.] Done.