This is really unbelievable: the company had heard only rumors of problems, so the stock sales couldn't be considered illegal.
Agreed, the Waksals and other should not be believed -- they will find this defense treated as not credible -- if they try to say, on the facts as described, that they had only a "rumor", and not material information.
They knew at least that a BMY official had heard from someone at FDA about possible problems with the Erbitux application, and they knew from December 4 that an FDA official had said that a turndown was possible. That seems plenty, especially since the Waksals and friends thought it was enough to prompt them to unload.
The Federal securities law definition of materiality involves whether the information would have assumed "actual significance" in the mind of an investor making a decision to buy or sell a security. (taken from an old Supreme Court case, TSC Industries v. Northway).
Materialty doesn't turn on whether it can be characterized as a "rumor" or "unverified" or whatever -- the question is whether the information is thought to be important enough to be factored into a buy or sell decision.
Since these people did actually sell IMCL in advance of the plunge the "rumored" FDA decision caused, it's awfully hard, laughable, for them to argue that the so-called rumor was not specific enough to assume actual significance in a sell decision.
It's worth noting that this sort of violation carries potential criminal as well as civil liability. So we can look forward, not just to SEC action, but also to the convening of a Federal grand jury in the Southern District of NY, and, I think likely, indictments.<g>
--RCM |
