August 2, 2011 – By Basil Katz
NEW YORK (Reuters) - Former FrontPoint Partners hedge fund manager Dr. Joseph "Chip" Skowron might be preparing to plead guilty, a court filing showed on Tuesday.
Skowron, who is free on $6 million bail, was one of the more prominent investors to become embroiled in the government's two-year crackdown on insider trading by hedge fund traders.
The Greenwhich, Conn. resident was charged in Manhattan federal court in April with illegally trading on tips he received from a French doctor who worked as a consultant for several drug companies. Skowron did not enter a plea at the time.
In the court filing, federal prosecutors from the Manhattan U.S. attorney's office said they intended to file a criminal information against Skowron, rather than seek a grand jury indictment.
Defense attorneys say the move by prosecutors to bypass a grand jury and file an information usually indicates a defendant has either agreed to cooperate with the government, or will plead guilty.
If Skowron enters a guilty plea, he will be the 47th person charged by prosecutors to either plead guilty or be convicted on charges arising from in the insider trading investigation. The pace of guilty pleas in the investigation has picked-up in the wake of Galleon Group founder Raj Rajaratnam's conviction in May on 14 counts of securities fraud and conspiracy.
Skowron's attorney, James Benjamin, declined to comment on the filing, as did a spokeswoman for prosecutors. Legally, the defense must agree to proceeding by information.
"Quite often, but not always, this means there is a negotiated agreement in the case and there is a plea agreement or a cooperation agreement," said former federal prosecutor David Siegal, now a partner at Haynes and Boone.
The court filing also showed the case had been assigned to U.S. District Judge Denise Cote.
The government has a limited time frame in which it must file either an indictment or an information against a suspect, unless the defense, the prosecution and a judge formally agree to a delay.
In Skowron's case, a judge signed off on three 30-day extensions, the latest of which expires on August 12. The information will likely be filed before then and Skowron must then enter a plea.
Skowron, who has a medical degree and a doctorate in cellular and molecular biology from Yale University, ran a $1.5 billion healthcare fund at FrontPoint.
The French physician in the case, Dr. Yves Benhamou, pleaded guilty in April to providing tips about biotech company Human Genome Sciences Inc <HGSI.O> to Skowron.
After getting the tip about Human Genome and telling Benhamou to lie to regulators probing the sale, Skowron passed on an envelope with at least $10,000 in cash when the men met in a hotel bar in Milan in April 2008, prosecutors say.
The allegations of insider trading involving Skowron prompted investors to begin pulling money from FrontPoint's healthcare oriented funds. FrontPoint is now in the process of shutting down most of its funds.
The case is U.S. v Joseph Skowron, U.S. District Court, Southern District of New York, No. 11-00997.
(Reporting by Basil Katz; editing by Matthew Goldstein)