A stockbroker and one of his clients were charged Thursday with insider trading, fraud, money laundering and conspiracy relating to an alleged tip that a San Diego bioscience firm would merge with pharmaceutical giant AstraZeneca.
The defendants allegedly used the tip, which came from the then-director of Information Technology at Ardea Biosciences Inc., Michael Fefferman, to earn illegal returns of 1,500 percent, federal prosecutors said.
Stockbroker Paul Rampoldi, 48, and his 51-year-old client, businessman Scott Blythe, were charged in an indictment returned by a federal grand jury.
According to court records, in April 2012, Fefferman learned that Ardea was planning to merge with AstraZeneca, and he knew that this top secret news would boost Ardea’s stock price.
Before the merger was announced to the public, Fefferman passed the inside information on to his close friend and brother-in-law Chad Wiegand, a licensed stockbroker at National Planning Corp., according to authorities.
According to prosecutors, Wiegand passed the information on to his co- worker at NPC, Akis Eracleous, also a licensed stockbroker.
Eracleous, in turn, passed the tip to Rampoldi and Blythe, authorities said.
To avoid suspicion and scrutiny, the three agreed that Blythe would trade on the information in his non-NPC brokerage account, and they would all share the profits, prosecutors said.
On the Friday before the merger was announced publicly, Blythe bought more than $5,000 in Ardea options, according to court documents.
On Monday morning, he sold the options for more than $88,000, generating profits of $83,000.
Blythe then withdrew more than $40,000 in cash so that he could secretly deliver Rampoldi and Eracleous their shares of the profits, according to court documents.
Fefferman, Wiegand and Eracleous were each charged previously and each has admitted involvement in the insider trading, prosecutors said.
Fefferman’s prosecution has been deferred contingent on his continued cooperation. Wiegand and Eracleous are scheduled to be sentenced Oct. 21.
Rampoldi and Blythe are expected to make their initial appearance in federal court tomorrow.
–City News Service