A French medical doctor and researcher was charged with breaking securities laws by tipping a hedge fund manager with confidential information about a clinical trial that he was involved in.  The tippees are not identified.  Yves M. Benhamou, M.D., allegedly breached his duty of confidentiality to Human Genome Science, Inc. (HGSI) when he illegally tipped non-public negative details about a clinical trial for a drug for treating Hepatitis C ahead of a company public announcement.  

As a member of the Steering Committee overseeing the clinical trial, Benhamou learned about 2 serious adverse events which prompted the company to reduce the dosage for the patients in that arm of the trial and publicly announce the changes.  Benhamou allegedly tipped material ahead of any such announcement to the hedge fund portfolio manager - tipper had befriended HF manager years earlier and provided consulting services to the manager. 

With that information, the portfolio manager sold all 6 million shares of HGSI stock that were held by 6 health care-related hedge funds he co-managed.  Sales took place during 6-week period prior to HGSI's public announcement on 1/23/08.  Two million shares were sold in a block trade near the closed on 1/22/08.  With HGSI shares dropping 44% on announcement day, the hedge funds avoided losses of at least $30 million.

In a parallel criminal proceeding, the U.S. Attorney's Office for the Southern District of New York today announced a criminal action against Benhamou. 

    Credits.   Matthew L. Skidmore and Deborah A. Tarasevich conducted the SEC's investigation;  Suzanne Romajas will lead the litigation.  [SEC PR 10-209; 11/2] 

For further details, click onto:   [ SEC Complaint ]