La Roche Agrees to Aid U.S. Insider Trading Probe of Bid for Sterling
F. Hoffmann-La Roche & Co. pledged Wednesday to cooperate in a U.S.-requested probe of possible insider stock trading preceding the company’s $4.2-billion takeover bid for Sterling Drug Inc.
According to published reports here, the U.S. Securities and Exchange Commission investigation was touched off by what the Zurich financial newspaper Finanz und Wirtschaft termed a wave of Sterling call options starting more than a week before Hoffmann-La Roche disclosed its intention to begin its tender offer Jan. 4.
The newspaper reported that the American Stock Exchange already had established that the principal buyers were two New York brokerages, Paine Webber and Drexel Burnham Lambert, which acted on behalf of clients in Switzerland.
A stock exchange spokesman in New York said Wednesday that the exchange routinely declines to confirm or deny reports regarding inquiries to member firms.
A spokesman for Drexel said the company only acted as a broker in handling an unsolicited order for the options.
Sterling filed suit Monday to block Hoffmann-La Roche’s hostile buyout offer, partly on the grounds that two of its subsidiaries engaged in illegal insider trading using advance knowledge of the bid.
The suit also alleged that the Swiss company failed to comply with U.S. disclosure laws and improperly concealed the identity of its controlling shareholders.
Joerg Kistler, a spokesman for the Swiss Justice Ministry, said the U.S. request received Monday was made under a 1982 convention drawn up by the Swiss Bankers Assn. Kistler said the request apparently preceded Sterling’s lawsuit.
The request reportedly lists four banks or companies in Basel as possibly involved in the trading. It was relayed to the Swiss Bankers Assn., which under the 1982 convention has set up a special independent commission to deal with such cases.
The Sterling suit claimed that two 100%-owned Hofmann-La Roche affiliates with insider knowledge of the tender offer illegally traded in Sterling stock and options before the offer was announced. The units were identified as Atlantis Finance Ltd. and Canadian Pharmholding Ltd., two Bermuda-based firms.
Hoffmann-La Roche has said Sterling’s lawsuit had no merit and would be contested vigorously.
The convention under which the SEC made its request was drawn up after Switzerland and the United States agreed to try to stop abuse of insider information in stock market operations.
Bank secrecy can be lifted if the special commission finds there is evidence supporting the SEC suspicions.
