SEC Charges Bristol-Myers Squibb Executive with Insider Trading

Jack Humphrey, Regulatory journalist
August 03, 2012 /

An executive at Bristol-Myers Squibb allegedly traded on confidential information about companies being targeted for potential acquisitions. His illegal trading freshly took place just weeks ago.

The US Securities and Exchanged Commission charged Robert D. Ramnarine, from East Brunswick, N.J., with insider trading after he “made more than $300,000 in illegal profits by misusing nonpublic information he obtained while helping Bristol-Myers Squibb evaluate whether to acquire three other pharmaceutical companies.”

He used multiple personal brokerage accounts to illegally trade in stock options of these potential target companies, the SEC claimed.

Prior to some trading, Ramnarine reportedly conducted Internet research from his Bristol computer to determine whether he could be detected by regulators.

He searched for such phrases as “can stock option be traced to purchaser” and “illegal insider trading options trace” and viewed such articles as “Ways to Avoid Insider Trading.”

Ramnarine even viewed a press release on the SEC’s website announcing an enforcement action arising from illegal trading in call options in advance of an acquisition announcement, the SEC noted.

“Ramnarine tried to educate himself about how the SEC investigates insider trading so he could avoid detection, but apparently he ignored countless successful SEC enforcement actions against similarly ill-motivated individuals who paid a heavy price for their illegal trading,” said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit. “Executives at pharmaceutical companies or in any industry should know better than to abuse confidential, market-moving information, and our charges against Ramnarine should serve notice that when you violate insider trading laws, no matter how you scheme, you will be caught.”

The SEC seeks to freeze Ramnarine’s brokerage account assets. In a parallel criminal action, the U.S. Attorney’s Office for the District of New Jersey announced the arrest of Ramnarine.

Ramnarine is an executive in the treasury department at Bristol-Myers Squibb. Accordingly, he conducted his insider trading schemes from August 2010 to July 2012, illegally trading in stock options of Pharmasset Inc., Amylin Pharmaceuticals Inc., and ZymoGenetics Inc. before those companies were set to be acquired.

The SEC alleges that just as Bristol was finalizing its agreement with ZymoGenetics in late August 2010, Ramnarine started to buy out-of-the-money call options.

A call option is a security that derives its value from the underlying common stock of the issuer and gives the purchaser the right to buy the underlying stock at a specific price within a specified period of time.

Typically, investors will purchase call options when they believe the stock of the underlying securities is going up. Ramnarine made $30,551 in illegal profits by trading ZymoGenetics call options in advance of a Sept. 7, 2010 public announcement that Bristol-Myers Squibb was acquiring ZymoGenetics.

The SEC further alleges that in advance of a Nov. 21, 2011 announcement that Pharmasset would be acquired by Gilead Sciences Inc., Ramnarine bought Pharmasset call options based on nonpublic information that he obtained from participating in Bristol-Myers Squibb’s evaluation of a possible acquisition of Pharmasset. This was part of an auction process conducted by Pharmasset and its investment bankers during the weeks before the Gilead-Pharmasset announcement. Ramnarine made $225,026 in illegal profits when he sold the calls immediately after the public announcement of Pharmasset’s sale.

According to the SEC’s complaint, Ramnarine very recently sold or “wrote” put options and purchased call options in advance of a June 29, 2012 announcement by Bristol-Myers Squibb that it would acquire Amylin.

A put option is a security that derives its value from the underlying common stock. When investors sell or “write” puts, they obligate themselves to sell the underlying security at a certain price before the expiration date. Investors usually write puts when they believe the price of the underlying stock price is moving up.

Ramnarine’s trades were based on material nonpublic information that he obtained by working on financing and capital structure matters as part of Bristol’s due diligence process leading up to the acquisition announcement. Ramnarine made $55,784 in illegal profits by trading Amylin put and call options in advance of the public announcement.

 

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