A Harvard-trained physician has been charged by federal prosecutors with evading $30 million in losses for a hedge fund by obtaining inside information about clinical drug trials from a fellow doctor.
Charges against Joseph "Chip" Skowron III were announced Wednesday in a criminal complaint unsealed in U.S. District Court in Manhattan. He was arrested earlier Wednesday and is expected to appear later in the day before a U.S. magistrate in Manhattan.
The Greenwich, Conn., resident is accused of gaining an advantage in his work as a hedge fund analyst through his meetings and conversations with Paris-based Dr. Yves Benhamou.
Skowron had been put on leave by FrontPoint Partners LLC in November. Skowron has been charged with conspiracy to commit securities fraud, securities fraud, and obstruction of justice, according to a criminal complaint. Skowron urged Benhamou to lie to investigators about information he provided, according to the complaint.
Benhamou pleaded guilty earlier this week and is cooperating with authorities, his lawyer, David Zornow, said.
"Dr. Benhamou has acknowledged his serious mistakes in judgment and intends to live up to his obligations under his cooperation agreement. Dr. Benhamou's conduct in this instance must fairly be considered in the overall context of his extraordinary contributions to his patients and to medical science," Zornow said in a statement.
In parallel criminal and civil complaints, prosecutors and regulators alleged that in late 2007 and early 2008 his tips to an unnamed portfolio manager enabled the manager's hedge fund to avoid $30 million in losses by selling shares in Human Genome Sciences Inc. (NASDAQ:HGSI) ahead of negative news about the company's trial of a drug for hepatitis C.
The U.S. Attorney's office in Manhattan also announced insider trading charges against an unnamed hedge fund portfolio manager, and obstruction of justice charges against the manager and an unnamed expert consultant.