Risk & Compliance

SEC Charges CPA, 4 Others With Insider Trading

The defendants allegedly made $234,000 by trading in Pharmasset shares based on nonpublic information about a takeover offer.
Matthew HellerSeptember 28, 2015

Five Florida residents  including two lawyers and an accountant — have agreed to pay a total of about $489,000 to settle charges that they traded in Pharmasset shares based on inside information about a takeover bid.

According to the U.S. Securities and Exchange Commission, attorneys Robert L. Spallina and Donald R. Tescher and accountant Steven G. Rosen obtained the information from a member of Pharmasset’s board whom they were advising on tax and estate planning matters.

The three bought Pharmasset securities and Spallina also tipped off two friends Thomas J. Palermo, a financial adviser at a brokerage firm, and Brian H. Markowitz, a securities trader and his next-door neighbor — the SEC said in a civil complaint.

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Following the announcement of Gilead’s $11 billion takeover of Pharmasset in November 2011, the five defendants allegedly reaped more than $234,000 in illegal profits as Pharmasset stock rose by 84%.

“Lawyers and accountants occupy special positions of trust and confidence and are required to protect the information entrusted to them by their clients,” Joseph G. Sansone, co-chief of the SEC’s Market Abuse Unit, said in a news release. “It is illegal for them to steal their clients’ confidential information to trade securities for their own profit or to tip others.”

The SEC said Spallina, Tescher and Rosen, a CPA employed by an accounting firm in Plantation, Fla., met with the unidentified Pharmasset director on Nov. 8, 2011.

During the meeting, the group “discussed the fact that Pharmasset’s board of directors was secretly negotiating to sell the company at a price per share significantly higher than the then-current price of Pharmasset stock,” the SEC said. “This information was confidential and nonpublic and was discussed for the sole purpose of providing [the] board member with legal, tax, and financial advice.”

Spallina, Tescher, Rosen, Palermo and Markowitz liquidated their Pharmasset holdings within hours of the Nov. 21 announcement of the Gilead takeover, the SEC said.

To settle the SEC’s charges, the defendants agreed to pay disgorgement, prejudgment interest and civil penalties. Rosen’s settlement amounted to $27,634, while Palermo, the main beneficiary of the trading, will pay $124,528.

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