SEC Sues 3 Entities, Swiss Investor in Rorer Trades
The Securities and Exchange Commission has sued three overseas entities and a Swiss investor for insider trading in shares of pharmaceuticals group Rorer Group Inc.
The company said Monday that it is in merger talks with an unidentified suitor, news that sent the stock sharply higher.
In a suit filed late Wednesday, the SEC accused Fondation Hai of Monaco; Holding Protection Ltd. of Athens; Unifund Sal of Kasslik, Lebanon, and Robert Rossi of Geneva of illegal trading in Rorer based on confidential information.
The suit, filed in Manhattan federal court, said the illegal transactions generated $5.9 million in profits.
The SEC has asked the court to issue an order barring the defendants from disposing of any Rorer shares. If the securities are sold, the SEC wants proceeds frozen.
The commission is also seeking an order preventing the defendants from destroying financial records.
On Monday, Ft. Washington, Pa.-based Rorer said it is negotiating the sale of a 68% ownership stake in a complex transaction valued at more than $3 billion, or $73 a share. Rorer’s products include the popular Maalox antacid.
Although the pharmaceutical company would not identify the suitor, the SEC suit said the possible buyer is in Europe.
The insider trading occurred Jan. 4-15, when the takeover talks were disclosed, the SEC alleged.
After the announcement was made Monday, Rorer stock soared by $13.75 to close at $63 a share on the New York Stock Exchange.
According to the suit, the defendants’ trading was done through call options, which allow a holder to buy stock at a specified price for a limited period.
The purchaser hopes the stock’s price will go up so he will profit when he sells it. The defendants are charged with making various profits when they sold their call option contracts Monday.
Fondation Hai and Holding Protection Ltd.’s order were placed through Prudential-Bache Securities Inc. Rossi and Unifund Sal placed their orders through Merill Lynch.
The suit also accuses unidentified investors in Rorer stock of insider trading.
Those investors were involved in call option and stock transactions placed through accounts maintained by Banque Vaudoise de Credit of Lausanne, Switzerland; Cambio Valorenbank, A.G. of Zurich, and Compagnie Financiere Espirito Santo S.A. of Lausanne.
Other accounts were maintained by Discount Bank Ltd. of Geneva and Banque Scandinave en Suisse S.A. of Switzerland.
