By Svea Herbst-Bayliss

BOSTON (Reuters) - Massachusetts charged a small hedge fund manager on Wednesday with having illegally used clinical trials data provided by an expert network group to pump up his ailing portfolio's investment returns.

James Silverman's RRC Bio Fund sprung back to life after initial heavy losses when the 43-year old stock picker traded on nonpublic information provided to him by doctors working as consultants for Guidepoint Global LLC, Secretary of State William Galvin charged in the civil complaint.

"With access to Guidepoint, the Fund began a dramatic resurgence, generating returns of over 55 percent in 2009 and 52 percent in 2010," Galvin said in the complaint.

"Silverman's actions crossed the line from legitimate research, to seeking out material nonpublic information, which he acted on to the detriment of other investors."

Galvin is seeking to put Silverman's Cambridge-based fund out of business, force Silverman to pay back all profits from the alleged wrongdoing and impose an undisclosed fine.

The charges come as the U.S. government probes how investors us so-called expert network firms such Guidepoint, which match up fund managers with doctors, engineers and mid-level executives to help investors with their research.

The government has charged that some of these consultations veered into illegal territory where executives passed on quarterly earnings data and information about clinical drug trials.

Massachusetts said Silverman, who had no experience running a hedge fund when he began trading in 2007, lost 16.9 percent during his first year.

After he started paying $80,000 a year to Guidepoint for the right to meet hundreds of physicians, however, Silverman made well timed bets on Ariad Pharmaceuticals Inc and Questcor Pharmaceuticals Inc that boosted his fund's performance quite dramatically and abruptly.

Late last year, French physician Yves Benhamou, who worked for Guidepoint, was arrested for having illegally told FrontPoint Partners' Joseph Skowron about clinical trial data at Human Genome Sciences Inc that saved the Greenwich, Connecticut-based hedge fund $30 million in losses.

"Despite their confidentiality obligations, each investigator provided Silverman material, nonpublic information regarding how the trial was progressing," the complaint said.

In the complaint, Galvin's office also suggested that Guidepoint was sloppy in conducting its business, saying the New York-based firm, which has an office in Boston, failed to screen confidentiality agreements and "does not monitor consultations or inquire about their substance.

"Rather than taking proactive steps, Guidepoint places the responsibility of recognizing and avoiding such conflicts squarely upon the expert consultant," the complaint added.

Silverman who oversaw roughly $24 million in assets could not be immediately reached for comment.

A spokesman for Guidepoint did not immediately respond to a request for comment.

(Reporting by Svea Herbst-Bayliss; editing by Gerald E. McCormick and Andre Grenon)