On June 9, Chad Wiegand and Akis Eracleous, two San-Diego based brokers, pled guilty in California district court to trading in Ardea Biosciences, Inc. stock with inside information.
Mr. Wiegand and Mr. Eracleous, brokers for National Planning Corporation, admitted to trading on inside information in advance of four separate announcements between April 2009 and April 2012. Mr. Wiegand received inside information from his brother-in-law and former Ardea Biosciences employee, Michael Fefferman. Mr. Fefferman tipped Mr. Wiegand material, non-public information, related to pharmaceutical trials of RDEA594, a drug for the treatment of gout; a global agreement with Bayer HealthCare, LLC to license a developmental cancer treatment; and the acquisition of Ardea by AstraZenca PLC. Mr. Wiegand passed along the non-public information to Mr. Eracleous, a friend and business associate.
For these actions, Mr. Wiegand, and Mr. Eracleous were charged by the US Attorney’s Office with conspiracy to commit securities fraud in violation of 18 U.S.C. § 371 and could face up to five years in prison and a $250,000 fine. The indictment alleged certain overt acts in furtherance of the conspiracy involving Mr. Wiegand, Mr. Eracleous and four co-conspirators who all worked together to act on the inside information. Mr. Fefferman pled by information and entered into a deferred prosecution agreement with the United States. In return for Mr. Fefferman’s cooperation, he will not face prosecution for the term of three years. Even though Mr. Wiegand was a remote tippee, there was no mention in the indictment of the tippee’s knowledge of the benefit that Mr. Fefferman received, which would have been required under the US Court of Appeals for the Second Circuit’s holding in Newman. U.S. v. Newman, 773 F.3d 438 (2d Cir. 2014). The standard set for criminal liability of a remote tippee in Newman hasn’t been directly addressed by the US Court of Appeals for the Ninth Circuit since that decision.
A parallel case also was brought by the Securities and Exchange Commission. The SEC charged Mr. Wiegand, Mr. Eracleous and Mr. Fefferman with insider trading violations. All parties have agreed to settle the case brought by the SEC under an agreement that calls for a disgorgement of profits, interest payments and penalties to be determined at a later date.
SEC v. Fefferman, No. 15-cv-1276 (MMA)(DHB) (S.D. Cal. Jun. 9, 2015)
U.S. v. Wiegand, No. 15-cr-1462-DMS (S.D. Cal. Jun. 9, 2015)
U.S. v. Fefferman, No. 15-cr-1534-W (Jun. 11, 2015)