Two Individuals, Including A Former Pharmaceutical Executive, Plead Guilty To Participating In Insider Trading Scheme Surrounding Alexion Pharmaceuticals’ Acquisition Of Portola Pharmaceuticals
Damian Williams, the United States Attorney for the Southern District of New York, and Christie M. Curtis, the Acting Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an Indictment charging JOSEPH LEWIS and his co-conspirators, PATRICK O’CONNOR and BRYAN WAUGH, a/k/a/ “Marty Waugh,” with insider trading securities fraud and related charges. The defendants were arrested this morning and will be presented later today.
U.S. Attorney Damian Williams said: “My Office, the Southern District of New York, has indicted Joe Lewis, the British billionaire, for orchestrating a brazen insider trading scheme and his co-conspirators and personal pilots, Patrick O’Connor and Bryan ‘Marty’ Waugh. We allege that, for years, Joe Lewis abused his access to corporate boardrooms and repeatedly provided inside information to his romantic partners, his personal assistants, his friends, and his pilots. Those folks then traded on that inside information – and made millions of dollars in the stock market – because, thanks to Lewis, those bets were a sure thing. None of this was necessary. Joe Lewis is a wealthy man, but as we allege, he used inside information as a way to compensate his employees or to shower gifts on his friends and lovers. That’s classic corporate corruption. It’s cheating. And it’s against the law – laws that apply to everyone, no matter who you are.”
FBI Acting Assistant Director in Charge Christie M. Curtis said: "As alleged, Lewis and his associates used material, non-public information for the personal benefit of themselves and close associates, despite knowing that the activity was illicit. This type of behavior - blatant disregard for the law - is not only illegal but undermines the integrity of our financial markets. The FBI is determined to ensure that anyone willing to perpetrate insider trading schemes is held accountable in the United States criminal justice system."
According to the allegations contained in the Indictments unsealed in Manhattan federal court and court filings:1
JOSEPH LEWIS is a billionaire businessman and investor who is the principal owner of the Tavistock Group, an international private investment organization. By virtue of LEWIS’s investments in certain companies, he has controlled one or more board of director seats at those companies and has deputized employees to serve on various company boards. In turn, through these employees, LEWIS received material, non-public information about these companies, including, for example, information about upcoming favorable test results for biochemical companies. LEWIS, on multiple occasions over the course of several years, then misused and misappropriated this confidential information to provide stock tips to various individuals in his life, including his employees, romantic partners, and friends, as a way to provide them with compensation and gifts. These individuals, in turn, traded on the tips provided by LEWIS for vast personal gain.
In addition, LEWIS conspired with others to hide his ownership shares of a pharmaceutical company through a pattern of false filings and misleading statements. More specifically, LEWIS was required to file schedules of share ownership with the Securities and Exchange Commission (“SEC”) because he was an owner of more than 10% of the stock of Mirati Therapeutics (“Mirati”). LEWIS reported to the SEC that he owned between 16 and 19.99% of the stock, when, in reality, he beneficially owned more than 19.99% of Mirati stock through an elaborate array of shell companies and other entities, including an offshore trust purportedly for the benefit of his granddaughter. As a result of the false disclosure of his ownership, LEWIS was able to exercise warrants in Mirati that he would otherwise not have been able to exercise, at vast financial gain. At one point, when HSBC bank inquired about a transaction related to Mirati, LEWIS’s employee falsely told HSBC that the transaction was the repayment of a loan from LEWIS, a false explanation that LEWIS had told him he was “happy with,” despite knowing it was false.
PATRICK O’CONNOR and BRYAN WAUGH are two pilots employed by LEWIS to fly his private aircraft. LEWIS tipped both O’CONNOR and WAUGH and encouraged them to trade based on material, non-public information. In one instance, LEWIS gave O’CONNOR and WAUGH loans, each worth $500,000, so they could buy a company’s stock before the public release of favorable clinical results. In connection with that loan, O’CONNOR texted a friend to buy the stock, told the friend the “Boss is helping us out and told us to get ASAP,” and assured the friend that “All conversations on app is encrypted so all good. No one can ever see.” O’CONNOR also texted the friend that “Boss mentioned around 6 to 8 weeks for [Mirati] to take profit” and that he thought “the Boss has inside info” and “knows the outcome” of not-yet-public clinical testing. O’CONNOR and WAUGH later sold the stock they had purchased on the basis of these tips for a profit, as did LEWIS’s assistant and friends.
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LEWIS, 86, a British national, has been charged with 13 counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison; three counts of securities fraud under Title 18, each of which carries a maximum sentence of 25 years in prison; and three counts of conspiracy, each of which carries a maximum sentence of five years in prison.
O’CONNOR, 66, of Preston Hollow, New York, has been charged with four counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison; three counts of securities fraud under Title 18, each of which carries a maximum sentence of 25 years in prison; and one count of conspiracy, which carries a maximum sentence of five years in prison.
WAUGH, 64, of Lynchburg, Virginia, has been charged with four counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison; three counts of securities fraud under Title 18, each of which carries a maximum sentence of 25 years in prison; and one count of conspiracy, which carries a maximum sentence of five years in prison.
The maximum potential sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Williams praised the outstanding investigative work of the FBI. He also expressed appreciation for the SEC, which separately initiated civil proceedings against the defendants today. Mr. Williams further thanked the Justice Department’s Office of International Affairs for its assistance during this investigation.
This prosecution is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Nicolas Roos, Jason A. Richman, and Alex Rossmiller are in charge of the prosecution.
The charges contained in the Indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
1 As the introductory phrase signifies, the entirety of the text of the Indictments and the description of the Indictments set forth herein constitute only allegations, and every fact described should be treated as an allegation.