Insider Stock Trading....At FDA....Oh My!
The NY Times today reported that a 15-year veteran chemist at the US Food and Drug Administration (FDA) has been charged with using confidential and proprietary information about pending drug applications to buy and sell pharmaceutical and biotechnology company stock.
According to a criminal complaint filed by the US Justice Department, Cheng Yi Liang, 57 and his son Andrew made millions trading stocks on inside information since 2007. The criminal lawsuit alleges that the Liangs traded stocks in five pharmaceutical and biotechnology companies that had drug applications under review at the agency. Cheng Yi Liang’s job gave him access to a password protected-database that tracked the progress of new drug applications. Some of the companies leveraged by the Liangs included Vanda Pharmaceuticals, Clinical Data, Momenta Pharmaceuticals, Middlebrook Pharmaceuticals and Progenics. The Securities and Exchange Commission (SEC) simultaneously filed a civil securities fraud lawsuit against Cheng Yi Liang.
The elder Liang is accused in the criminal complaint of “of using the FDA database to get an early look at F.D.A. decisions on companies developing drugs and then working with his son to trade on that knowledge, buying stock ahead of good news and selling it before bad news was announced. Both complaints assert that the defendants made just under $2.3 million in direct profits and avoided an additional $1.3 million in losses”. Further, the S.E.C. complaint accused FDA employee Liang of illegally trading ahead of more than two dozen F.D.A. announcements involving drug applications by 19 companies.
The case is noteworthy because, according to the Times article “it is uncommon for insider-trading investigations to involve FDA, despite the significant amount of market-moving information that passes through the agency each year. The agency maintains a rigorous ethics code and imposes significant restrictions on stock ownership and trading by its employees.” The good news is that insider trading at FDA is rare and that a majority of its employee maintain ethical and moral standards that are consistent with the mission of the agency which is to supply the American public with safe and efficacious medicines. However, while the Liangs got caught, it does not mean that other less-than- scrupulous employees at FDA have also not benefited from less sophisticated insider trading schemes than those employed by the defendants. After all, FDA employees are human like the rest of us and the temptation to “get rich quickly” can be overwhelming especially during hard financial times.
Until next time...
Good Luck and Good Job Hunting (try FDA, there is at least one open position that needs to be filled)
The Massachusetts-based biotechnology company, 