A hearing is scheduled in Washington today in the case of a former MedImmune Inc. executive charged with insider trading and lying to the U.S. Securities and Exchange Commission.
Eric I. Tsao, a former vice president of the Gaithersburg-based biotechnology firm, is charged with violating securities law in connection with trades he allegedly made using insider information in 1999 and 2001, according to criminal complaints filed last month with U.S. district courts in Maryland and Washington.
Tsao could not be reached for comment. His lawyer, Richard A. Rossman, did not return calls to his office yesterday.
Jamie Lacey, a MedImmune spokeswoman, said Tsao recently resigned from the company but declined to comment further.
Law enforcement and SEC authorities are scheduled to hold a briefing after today's hearing at U.S. District Court in Washington.
Insider trading carries a penalty of up to 10 years in prison and a $1 million fine, and perjury carries a penalty of up to five years in prison and a $250,000 fine, said Channing Phillips, a spokesman for the U.S. attorney's office in Washington. Phillips declined to comment further on the case.
Tsao was charged in federal court by information, rather than indictment, which often signals plea negotiations are under way in a case.
According to court documents, Tsao had access to non-public information that MedImmune was planning to buy U.S. BioScience Inc. of Pennsylvania in 1999. Days before MedImmune announced the acquisition, Tsao allegedly bought 6,000 shares of U.S. BioScience through an online brokerage, the court documents say.
A few days after the acquisition was announced, Tsao allegedly sold the shares for an $18,000 profit.
Tsao used the money to pay for home expenses, according to court documents.
During an SEC investigation of the trading, Tsao testified under oath that he did not order shares online of U.S. BioScience. Tsao testified that it was his wife who bought the shares, according to court documents.
Tsao also is charged with lying to the SEC about fraudulently trading shares of Aviron in November and December 2001. MedImmune announced in December 2001 that it planned to buy Aviron, a California company that developed the influenza vaccine known as FluMist. The Aviron shares were traded in Tsao's father's account, and Tsao said the trades also were made by his wife, according to the court documents.
Tom Newkirk, an associate director in the SEC's enforcement division, told Bloomberg News, "People who lie to us are going to be referred to the U.S. attorney."
The SEC filed a civil lawsuit last year alleging that Tsao conducted three incidents of insider trading, amassing a profit of more than $150,000. That lawsuit charged that Tsao bought shares of U.S. BioScience, Aviron and ImClone Systems Inc. within days of finding out that MedImmune was about to make a deal with each company.
In each of those deals, Tsao allegedly made the trades using an online account that was "nominally" held by his parents in Taiwan, but that he opened, controlled and funded with his own money, according to court documents.