A Florida brokerage adviser, Kevin L. Dowd, was charged with insider trading for tipping two friends before Gilead Sciences Inc.’s acquisition of Pharmasset Inc. for $11 billion, U.S. prosecutors in New Jersey said.
Dowd, 37, who worked at a brokerage in Aventura, Florida, learned that a Pharmasset director told his supervisors about the deal, which was announced on Nov. 21, 2011, according to a Federal Bureau of Investigation arrest complaint filed today.
Dowd was told not to act on the information yet tipped a childhood friend, identified as E.F., who made illicit profit of $163,621, and another friend who made $544,706, the FBI said.
In exchange for the tip, E.F. gave Dowd a wooden dock for his jet skis and a cashier’s check for $35,000, Paul Fishman, the U.S. attorney in New Jersey, said in a statement. Dowd used the money to buy an in-ground pool at his Boca Raton home, according to the FBI. Agents confronted Dowd in July 2012.
“Dowd admitted that he told J.F., but falsely stated that he had never received information that Pharmasset was going to be acquired by another pharmaceutical company,” according to Fishman.
Dowd, who was arrested at his home today, is charged with conspiracy to commit securities fraud and faces as many as five years in prison. He is scheduled to appear this afternoon in federal court in West Palm Beach, Florida.
The U.S. Securities and Exchange Commission also sued Dowd today in federal court in New Jersey.
“As an industry professional, Dowd surely knew what he was doing was wrong, but he incorrectly thought that his scheme was clever enough to avoid detection by investigators,” Daniel M. Hawke, chief of the SEC’s Market Abuse Unit, said in a statement.
The number of people sued by the SEC or charged with insider trading by the Justice Department has more than doubled since 2008, according to data compiled by Bloomberg. There were 56 in 2008, 96 in 2009, 67 in 2010, 104 in 2011 and 125 last year. Of those, 22 percent were linked to trading involving health-care stocks.
The criminal case is U.S. v. Dowd, 13-mj-6515, U.S. District Court, District of New Jersey (Newark).