Ex-Investment Adviser, Filmmaker Charged in Trading Scheme
A former investment adviser and an independent film producer were accused by federal prosecutors in New York of taking part in a $2.6 million insider-trading scheme involving drug-company takeovers.
In his role at a consulting firm, Scott Allen, 45, of Atlanta, learned inside information about the April 2008 acquisition of Millennium Pharmaceuticals Inc. by Takeda Pharmaceutical Co. and about the September 2009 purchase of Sepracor Inc. by Dainippon Sumitomo Pharma Co., according to a criminal complaint unsealed today in Manhattan federal court.
Before the deals were announced, Allen disclosed the information to John Bennett, a producer and a longtime friend, the U.S. said. Bennett, 48, of Norwalk, Connecticut, reaped $1.1 million in profits trading on the information, the U.S. said. Allen and an unidentified person who is cooperating with the U.S. made $2.6 million, according to prosecutors.
“Scott Allen and John Bennett were old friends who chose to profit from that friendship by breaking the law,” Manhattan U.S. Attorney Preet Bharara said in a statement today.
Bennett, who worked for Merrill Lynch from 2005 to 2007, has acted in several films, including the 1990 courtroom drama “Presumed Innocent,” according to the website IMDb.com. He cofounded Bennett Robbins Productions in 2008, according to the company’s website.
The men are each charged with one count of conspiracy to commit securities fraud and two counts of securities fraud. If convicted, they face as long as 20 years in prison on each count of securities fraud and fines of as much as $5 million, prosecutors said.
Allen and Bennett surrendered to agents of the Federal Bureau of Investigation this morning, said Jim Margolin, a spokesman for the FBI’s New York office. Both men appeared before federal magistrate judges today -- Allen in Atlanta and Bennett in Manhattan -- and were released on $500,000 unsecured bonds.
Henry Mazurek, a lawyer for Bennett, declined to comment on the charges. Brian McEvoy, a lawyer for Allen, said his client isn’t guilty.
According to the complaints filed by prosecutors and the SEC, FBI agents traced the activities of Bennett and Allen as they met in Manhattan hotels, shared sushi lunches at the Time Warner Center and held sidewalk rendezvous.
Bennett, who worked near Manhattan’s Columbus Circle, met with Allen near his office at Rockefeller Center, with federal agents trailing them and confirming their meetings through bank ATM cash withdrawals and Metrocard subway swipes.
The SEC says that Allen received a benefit for giving out the tips, including money from Bennett. From April 2008 to August 2010, Bennett made at least 27 cash withdrawals of between $1,500 and $8,000, for a total of more than $150,000.
The withdrawals were structured under the $10,000 threshold to avoid triggering the filing of a currency transaction report. The SEC said 25 of the withdrawals were between $5,000 and $8,000.
The case is U.S. v. Allen, 11-MAG-2361, U.S. District Court, Southern District of New York (Manhattan).
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