An FDA chemist pleaded guilty to charges he made $3.8mn in illicit profits by buying and selling shares in drug companies using confidential insider information about upcoming drug approvals.  Cheng Yi Liang, 57, traded shares in more than 25 companies between July 2006 and March 2011. He pleaded guilty to two counts of securities fraud and making false statements in federal court in Maryland.  SEC civil charges are still pending.  His son was also initially charged in the case but prosecutors later dismissed those charges. Collecting Insider Information. In the scheme, Liang allegedly reviewed documents about the progress of experimental drugs using an FDA database that includes confidential and non-public documents about trials, studies and correspondence, according to court papers filed last month.  He then made the trades from his home computer or on an Apple iPad.

Information about prescription drug approvals or denials can prompt big stock swings and has been the subject of insider trading investigations previously; however, it is rare for such a case to involve a government employee.

An FDA spokeswoman said that Liang resigned his position and that the agency has begun taking steps to prevent such activity in the future. Sentencing. Liang is scheduled for sentencing on 1/9/12.  He faces up to 20 years in prison for the securities fraud count and up to 5 years for the false statements count.  He also agreed to forfeit the $3.8mn in illicit profits - bu giving up a home and condominium in Maryland and funds in 10 bank and investment accounts.     [Reuters, 10/18/11]