Former Oppenheimer Adviser Charged in Insider-Trading Case
June 03 2016 - 3:40PM
Dow Jones News
A former financial adviser at Oppenheimer & Co. Inc. was
charged on Friday with participating for six years in an
insider-trading scheme with his close childhood friend, a former
Pfizer Inc. employee.
David Hobson, 47 years old, was arrested Friday morning at his
home in Providence, R.I.
Prosecutors say Mr. Hobson orchestrated a yearslong
insider-trading scheme with his childhood friend Michael Maciocio,
46, a former Pfizer employee. Mr. Maciocio pleaded guilty to
conspiracy and securities fraud charges two weeks ago, according to
a spokeswoman for the Manhattan U.S. attorney's office.
A lawyer for Mr. Maciocio didn't respond to a request for
comment. A lawyer for Mr. Hobson couldn't immediately be
identified.
The charges Friday were filed by Manhattan federal prosecutors
and by the Securities and Exchange Commission. Authorities didn't
name the employers for Messrs. Hobson and Maciocio, but
representatives for Oppenheimer and Pfizer confirmed that they were
former employees.
Both companies said they were cooperating with the
government.
A Pfizer spokeswoman said in a statement that the company
terminated Mr. Maciocio's employment in 2014 "after identifying the
potential improper conduct."
An Oppenheimer spokeswoman said the company became aware of this
issue "some time ago."
Prosecutors allege Mr. Maciocio earned more than $116,000 in
illegal profits from the scheme. Mr. Hobson allegedly made at least
$187,000 for himself and at least $145,000 for his customers.
Messrs. Maciocio and Hobson grew up together in Rhode Island,
where they played Little League baseball and attended the same high
school, authorities said.
Mr. Maciocio's role at his employer was to evaluate the
company's capacity to manufacture certain drug compounds, according
to authorities. Since 2008, Mr. Maciocio allegedly began sending
Mr. Hobson inside tips about potential deal activity between Pfizer
and companies that included Medivation Inc., Ardea Biosciences Inc.
and Furiex Pharmaceuticals Inc.
Pfizer had considered acquiring Ardea in 2010 and 2011, and
renewed its interest in 2012. Pfizer ended up abandoning the
consideration. Ardea was acquired in 2012 by AstraZeneca PLC.
In 2014, Pfizer was in discussions over a potential acquisition
of Furiex. Pfizer decided to abandon the transaction. Furiex was
acquired later that year by Forest Labs Inc.
In exchange for the tips, authorities said Mr. Maciocio received
"personal benefits," including investment advice.
Mr. Maciocio often wasn't told the name of a potential
acquisition target, but using clues and through his own research,
he would figure out the companies' identities and ask Mr. Hobson to
make trades based off the information, authorities said.
For instance, Mr. Maciocio allegedly learned in May 2008 that
Pfizer was pursuing a potential deal with a company code-named
"Madeline." A Pfizer director shared select details about the deal
with Mr. Maciocio so that Mr. Maciocio could help determine
Pfizer's ability to manufacture a particular drug, according to the
SEC complaint.
Mr. Maciocio figured out that "Madeline" was Medivation and
allegedly tipped off Mr. Hobson, according to the complaint. They
both allegedly began accumulating Medivation shares as the deal
progressed. On the day Pfizer and Medivation publicly announced the
deal in September 2008, Medivation shares opened up 30% from the
previous day. In total, Mr. Hobson made more than $200,000 for
himself and his clients off the announcement, prosecutors said.
Write to Nicole Hong at nicole.hong@wsj.com
(END) Dow Jones Newswires
June 03, 2016 15:25 ET (19:25 GMT)
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