SEC settles NJ insider trading case against Fla. lawyers
By Charles Toutant, From New Jersey Law Journal
The U.S. Securities and Exchange Commission has settled with two Florida lawyers and three other people charged with engaging in insider trading of stock in Princeton drug company Pharmasset before it was bought by Gilead Sciences Inc. in 2011.
Attorneys Robert Spallina and Donald Tescher were among five people charged in federal court in Trenton on Sept. 28 with insider trading in advance of the sale of Pharmasset.
The same day, the SEC announced a settlement with the five defendants. The terms of the agreement, which calls for the defendants to return the entire amount of their profits from the insider trading—about $234,000, plus prejudgment interest—and to pay another $234,000 in penalties, are subject to a judge’s approval.
Spallina, Tescher and accountant Steven Rosen bought stock in Pharmasset after learning from a member of that company’s board of directors, who was a mutual client, that the company was about to be sold at a premium, the SEC said in its complaint. The lawyers and the accountant learned from the unidentified board member that the Pharmasset board was in negotiations to sell itself during a Nov. 8, 2011, tax- and estate-planning meeting with the board member, the SEC said. Spallina, Tescher and Rosen purchased Pharmasset stock immediately thereafter.
Spallina also told his next-door-neighbor, Brian Markowitz, who was his client and an active securities trader, as well as financial advisor Thomas Palermo, a broker-dealer, about the impending acquisition of Pharmasset, and both purchased the stock based on Spallina’s tips according to the SEC. Palermo’s LinkedIn profile lists his occupation as senior vice president and financial advisor at Morgan Stanley.
After the acquisition of Pharmasset by California-based Gilead Sciences on Nov. 21, 2011, Pharmasset stock rose by 84 percent and the five defendants sold their holdings, allegedly reaping more than $234,000 in illegal profits, the SEC said.
Spallina, 50, realized $39,156 from the insider trading transaction, while Tescher, 70, made $9,937. Accountant Rosen, 65, made $27,634 in the Pharmasset transaction, while Palermo, 48, made $124,528 and Markowitz, 56, made $32,932, according to the SEC.
Spallina, Tescher and Rosen, along with another accountant from Rosen’s firm and the board member’s financial advisor, met at the board member’s office for about an hour on Nov. 8, 2011, the SEC said. The board member said a sale of Pharmasset appeared imminent and discussed his extensive holdings of that company, the SEC said. The meeting ended at roughly 11 a.m.
At 11:09 a.m., Spallina called broker-dealer Palermo at his workplace, and told him about the impending sale of Pharmasset, and Palermo made his first purchase of the stock at 11:14, the SEC said.
Rosen, the accountant, made the first of a series of purchases of Pharmasset stock at 11:26 a.m., the SEC said. Tescher made a purchase of Pharmasset stock at 11:40 a.m. Spallina made the first of a series of purchases of Pharmasset stock at 1:51 p.m. that day, the SEC said.
That evening, Spallina visited Markowitz, his next-door neighbor and golf partner, and told him about the impending sale of Pharmasset. The following morning, at 9:41, Markowitz made the first of several purchases of the stock, the SEC said.
On Monday, Nov. 21, at 7 a.m., Pharmasset announced its acquisition by Gilead at an 89 percent premium over its stock price at the close on Nov. 18, the SEC said. The defendants began selling off their stock in the company that day, the SEC complaint said.
The five defendants were charged with violating sections 10(b) and 14(c) of the Exchange Act. The SEC said Spallina, Rosen and Tescher violated federal securities law by trading based on information misappropriated from their client; that Spallina violated securities law by tipping off Palermo and Markowitz; and that Palermo and Markowitz violated the law by trading based on misappropriated information.
Tescher was represented by Norman Moscowitz of Moscowitz & Moscowitz in Coral Gables, Fla., who said his client resolved the case without admitting guilt or liability and was “pleased to have settled this and put it behind him.”
Tescher’s involvement in the case was “a single, small transaction,” said Moscowitz, who added that his client had “a long, distinguished career.” Tescher and Spallina are no longer affiliated, said Moscowitz.
Spallina’s lawyer was Lawrence Lustberg of Gibbons in Newark. Rosen was represented by Bernard Cassidy of Lubell Rosen in Fort Lauderdale, Fla. Palermo was represented by Carl Schoeppl of Schoeppl & Burke in Boca Raton, Fla., and Markowitz was represented by Marty Steinberg at Hogan Lovells in Miami. They did not return calls about the case.
IMAGE: Paul Giamou/iStock
