Settlement OKd in Allergan Insider Suit : Former Executives, Associates Agree to Pay $19,838 in Penalties
Insider trading charges against three former Allergan Pharmaceuticals executives and one of their associates were settled earlier this week after the defendants, without admitting or denying guilt, agreed to disgorge nearly $26,000 in profits and pay $19,838 in penalties, according to the Securities and Exchange Commission.
A fifth defendant, also a former Allergan employee, has not yet responded to the complaint filed Wednesday in Los Angeles federal court. Irvine-based Allergan is a subsidiary of SmithKline Beckman Corp.
The case against the five men stems from their combined purchase of 12,000 shares of International Hydron Corp. stock in September, 1984. Based on inside information, the executives purchased the stock one day before SmithKline announced its intention to purchase Hydron, a Woodbury, N.Y.-based soft contact lens maker, for $160 million, according to the SEC complaint.
Hydron common stock rose from $13 to $16.75 a share after the public announcement of the proposed purchase. But about a month later, SmithKline dropped its plan to purchase Hydron.
A spokeswoman for SmithKline Beckman said the company had not seen a copy of the SEC complaint and could not comment.
Increased Scrutiny
“Market surveillance by the American Stock Exchange picked up the unusual trading (in Hydron stock),” said Jeffrey S. Kob, an attorney for the SEC in Los Angeles. “Although it’s a smaller case, we view this as sending a message. . . . if you inside trade, you will be afoul of the law.”
According to the complaint, William Adams, of Fullerton, was director of corporate accounting for Allergan when he learned from a vice president that SmithKline intended to buy Hydron, a subsidiary of National Patent Development Corp. of Delaware.
Adams, according to the SEC, immediately relayed the information to several employees, including James Tortorice, of Irvine, who, as manager for accounting services, reported to Adams. Adams also shared the information with his brother-in-law, Howard Jacobs, of Anaheim, the complaint alleged. Jacobs purchased 4,000 shares of Hydron stock, including 1,000 bought on Adams’ behalf, the complaint said. Jacobs later paid Adams $3,000 after he sold the stock at a profit, according to the complaint.
Two other former Allergan employees, David Serrano and James Fischer, also purchased Hydron stock. Serrano, of Dana Point, worked as a manager in Allergan’s medical plastics division. Serrano, who served as Tortorice’s attorney, bought 5,250 shares of Hydron stock, purchasing 1,000 shares on Tortorice’s behalf, the complaint said.
Tortorice declined to comment on the case, and the other defendants could not be reached.
