“The material nonpublic information obtained by Sarkesian, after which he caused Quorne to purchase InterMune call options, was disclosed to him for a personal benefit to the source of that information,” the SEC said in court papers. The agency didn’t identify who allegedly tipped him, or what that person got in return.
In March, Sarkesian and Quorne settled with the SEC, agreeing to hand over $616,000 in profit and a $93,806 penalty. Neither admitted wrongdoing. The SEC claims involving another 237 InterMune options were dismissed after the buyer came forward and provided a legitimate reason for the trades. The agency didn’t identify the buyer. Sarkesian’s New York-based lawyer, Michael Dailey, declined to comment on the settlement.
SAC Capital
The U.S. investigation of InterMune trades by SAC Capital, the Stamford, Connecticut-based $14 billion hedge fund founded by billionaire Steven Cohen, focuses on the first half of 2010, a person acquainted with the case said. InterMune’s stock soared in early March 2010 after the drug company’s experimental medicine was reviewed more favorably by U.S. regulators than analysts had expected.
SAC, as well as affiliates CR Intrinsic and Sigma Capital Management, bought more than 4 million shares of InterMune in the first quarter of 2010, increasing its holdings to almost 4.5 million shares from none in the prior two quarters, according to data compiled by Bloomberg.
Jonathan Gasthalter, a spokesman for SAC Capital, said the hedge fund is unaware of investigations related to InterMune. Jim Goff, a spokesman for Brisbane, California-based InterMune, declined to comment on the cases.
Documenting Leaks
Unlike the domestic probe of SAC Capital’s InterMune trades, documenting leaks involving European drug approvals, Asian companies in merger talks or South American stock brokers swapping takeover tips is problematic for U.S. authorities because the action often takes place outside their jurisdiction.
Instead, the agency files a complaint in federal court on the discovery of red flags, like a trader’s unprecedented use of options or a sudden interest in a soon-to-be-acquired company, seeking to freeze assets. But the subsequent investigative hurdles can be daunting.
“Sometimes we have to pierce through four or five different levels of corporate structure before we can get behind the trading,” Friestad said. “When individuals are in foreign jurisdictions, there are limits on our ability to serve subpoenas and get information efficiently.”