Former Morgan Stanley brokerage advisor Kevin L. Dowd, was charged with insider trading for tipping two friends ahead of Gilead Sciences Inc.’s acquisition of Pharmasset Inc. for $11 billion, U.S. prosecutors said.
Dowd, 37, who worked at a brokerage in Aventura, Florida, learned that a Pharmasset director told his supervisors about the deal before it 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 J.F., who made illicit profit of $163,621, and another friend who made $544,706, the FBI said.
In exchange for the tip, J.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. In July 2012, agents confronted Dowd, who said he told J.F. to buy the stock while denying he had inside information, the FBI said.
“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 long as five years in prison if convicted. He appeared today in federal court in West Palm Beach, Florida.
Peter Willis, a lawyer for Dowd, didn’t immediately return a call seeking comment on the charges.
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.
Morgan Stanley’s wealth management unit has cooperated with the SEC and Justice Department, Christine Jockle, a spokeswoman for the New York-based bank, said in an e-mail.