Two men - a pharmaceutical executive and a former Florida hedge fund trader - settled SEC civil allegations that they had conspired to trade on insider information.  Interestingly, no tipster nor stock exchange flagged suspicious trading in this case.  Rather, SEC investigators traced relationships and trading patterns stemming from a probe that in 2008 had involved other Wall Street players and different securities altogether.  They agreed to pay a combined $650,000. 

Using code words for stock prices and sharing a confidential deal sheet, Merck executive James Self, Jr., in 2007 passed bidding information to Florida trader Stephen R. Goldfield, who traded on the information.  Mr. Goldfield, 46, was accused of trading on nonpublic information related to the $15 billion merger of MedImmune Inc. and AstraZeneca PLC.  Mr. Self, 45, illegally shared with Mr. Goldfield confidential information that Mr. Self gained as an executive at a third pharmaceutical company, which people familiar with the matter said was Merck.  There, as part of a "deal team" considering potential mergers, he was privy to details of a potential MedImmune acquisition.

    An Illicit Relationship Blossoms.   The SEC's complaint describes the 2 men as friends who met in the executive M.B.A. program of the Wharton School at U. of Penn in the 1990s and said they talked about deal developments several times in March and April 2007.  The complaint provided the following account:

At one point, they spent an evening together at Mr. Self's home in the Philadelphia suburb of Doylestown, Pa., when Mr. Goldfield was in town from Florida visiting his father.  Mr. Self, who was evaluating a potential Merck offer for MedImmune, showed Mr. Goldfield a "deal sheet" outlining MedImmune's plans to sell itself.  The details included MedImmune's timeline for requiring suitors to say how much they thought the company was worth.

Mr. Self regularly called Mr. Goldfield from his cellphone while going to and from work at Merck.  In one conversation, Mr. Self said that "the weather was in the 50s" or words to that effect, conveying that Mr. Self's company's bid for MedImmune was going to be in the $50s.  At the time, MedImmune shares were trading in the $30s.

The information was confidential, said the complaint.  Mr. Self sought to "boost his reputation in Goldfield's eyes and to show Goldfield that he was working on important matters."  Over several weeks through Friday, April 20, Mr. Goldfield made a series of trades, buying stock and options in a joint account held by him and his wife, and another held only in his wife's name.  At times, Mr. Goldfield sold some of his securities, locking in profits and giving him the cash to buy more.  In settling the case, Mr. Goldfield agreed to pay $600,000, and Mr. Self agreed to pay $50,000. The SEC cited the men's "statement of financial condition" as a factor in those amounts.   [WSJournal, 9/2]