June 6, 2016
By Mark Terry, BioSpace.com Breaking News Staff
In Manhattan federal court on Friday, it was revealed that a former Pfizer master planner in the company’s Active Pharmaceutical Ingredient Supply Chain Group, had been secretly testifying about a six-year-long insider trading scheme.
Michael Maciocio, 46, had been providing insider information to his childhood friend, David Hobson, who was an adviser with Oppenheimer & Co. Hobson allegedly used the inside information to make trades, making $370,000 for himself, clients and Maciocio. Hobson has also worked at the Royal Bank of Canada (RBC).
Both men grew up together in Rhode Island. They played Little League baseball together and were in high school together. Hobson acted as Maciocio’s broker for about 20 years.
Starting in 2008, Maciocio began feeding information about potential Pfizer acquisition targets to Hobson. Maciocio apparently wasn’t high enough in the company to have the actual names of the companies, but he did learn Pfizer’s code names for them, as well as data regarding “composition, chemical structure and clinical testing information about the companies’ drugs.” Maciocio, working sometimes with Hobson, used that data to work out the acquisition targets’ identities.
The government alleges that Hobson earned $180,000 for himself, $40,000 for Maciocio, and $150,000 for his clients. Hobson used the information to trade shares of Medivation , Ardea Biosciences (RDEA), and Furiex Pharmaceuticals , which was acquired by Allergan in 2014.
On Friday, Hobson was arrested at his home in Providence, Rhode Island. He is being charged with conspiracy and securities fraud. He was later released after a court hearing.
Charges were brought by Manhattan U.S. Attorney Preet Bharara. Since 2009, Bharara has led an insider trading program that has brought charges against 104 individuals with 79 convictions.
Although the court records don’t identify the two men’s employers, Pfizer, Oppenheimer and RBC confirmed their employment.
“Oppenheimer became aware of this issue some time ago and has cooperated extensively with government authorities in connection with a former employee who was the subject of the indictment announced today, “ Alexandra Gamble, an Oppenheimer spokeswoman, told Bloomberg. “Oppenheimer will continue to do so in the future.”
“The charges in this case relate to the conduct of a former employee,” Pfizer said in a statement to Bloomberg. “Pfizer takes these allegations seriously and is cooperating fully with the authorities. After identifying the potential improper conduct, Pfizer determined the employee’s actions breached the company’s policies on business conduct and terminated his employment.”
On May 20, Maciocio secretly pleaded guilty to four criminal charges related to the trading activities, which happened from 2008 to 2014. Maciocio reportedly made $116,000 on his own insider trading.
The charges against Hobson are two of conspiracy and two of securities fraud. According to Bloomberg, the most serious carry a top sentence of 20 years in prison. Hobson pleaded not guilty.
In the mid-1990s, Maciocio opened a brokerage account at Oppenheimer, where Hobson worked at that time. When Hobson changed jobs to RBC Capital Markets in 2010, Maciocio followed.
“We allege that Maciocio and Hobson engaged in a multi-year insider trading scheme by repeatedly using the confidential information of Maciocio’s employer to place illicit trades,” said Joseph Sansone, co-chief of the SEC Enforcement Division’s Market Abuse Unit, in a news release. “Given his years of experience in the securities industry, Hobson’s misuse of this highly sensitive corporate deal information represents an especially egregious violation of the law.”
The case is U.S. v. Hobson, 16-cr-00351, U.S. District Court, Southern District of New York (Manhattan).
