Five Broward County Residents Settle Insider Trading Charges with SEC

In early November, 2011, an unnamed board member of Pharmasset Inc., a New Jersey based pharmaceutical company that developed a drug named sofosbuvir, (brand name Sovaldi) which had promising results in the treatment of hepatitis C met with members of the company’s Boca Raton based legal team and longtime advisors Robert Spallina and Donald Teascher.

Steven Rosen, CPA, a director in a Plantation based accounting firm was also present at the meeting. At the time, Pharmasset didn’t have any major drugs on the market.

The unnamed board member owned a substantial amount of his company’s stock and was discussing financial and legal advice with the lawyers and accountant regarding what he may realize monetarily from a pending buyout transaction if the company was sold. Rumors of the sale of the company had been abounding recently causing the stock price to slowly move on a slightly upward bias. During the extent of their conversation he told the three men that Pharmasset was in the advanced stages of a negotiation to sell the company.

According to the SEC complaint, the meeting was held on November 8, 2011 to discuss a year-end tax planning session which during its course released material confidential information to the three men, specifically that the company was about to be bought out by Gilead Sciences, a major pharmaceutical company; for an amount that would result in a much higher stock price for Pharmasset. Thereafter, within a short period of time, Gilead finalized the tender offer, paying eleven billion dollars for the acquisition of the smaller company. The FDA didn’t officially approve the drug Sovaldi until two years later in December 2013.

Michael Cohen is an experienced Fort Lauderdale insider trading attorney who has significant experience in all types of cases of securities fraud and those related to it as well as all other federal criminal charges. If you, an associate or loved one is accused or arrested for insider trading Mr. Cohen’s law practice is the proper choice to challenge these types of allegations.

Once the meeting concluded Spallina, Teascher, and Rosen purchased Pharmasset securities within a few hours of the conclusion of the meeting, apparently based on this material non-public information.

Unable to contain his excitement about the probable pending moneymaker, Spallina called his close longtime friend Thomas Palermo who was a professional registered broker-dealer who worked for a major brokerage house at their Coral Springs branch and held the title of Senior Vice President and Financial Advisor. Palermo had been working in the securities industry for approximately twenty years.

Minutes later, Palermo purchased 750 shares of VRUS common stock which was the stock symbol for Pharmasset at a price of $68.12 per share. The cost of the purchase was a little more than $51,000 and the transaction took place within his IRA account. Palermo would make additional purchases as can be read on a separate page of my Website.

In addition to letting Palermo “in” on the information Spallina paid a visit to his next door neighbor Brian Markowitz that same evening. Markowitz was an experienced securities trader as well as being one of Spallina’s clients, specifically as his estate planning attorney. They had regularly discussed investment strategies in the past and had also vacationed, socialized, and played golf together being members of the same club, as was the case regarding his friendship with Palermo. During the visit, Spallina tipped Markowitz to the context of his earlier meeting at the board member’s office.

To sum up the results of the buyout, Pharmasset’s stock closed at $72.73 on Friday November 18, 2011, and opened the following Monday at $134.78, reaching a high that day of $135.00

The five Floridian’s actions raised red flags at the SEC resulting with Teascher and Rosen being charged with breaching their fiduciary duties and Spallina additionally charged for illegally tipping off Brian Markowitz and Steven Rosen with the material non-public information.

Based on the amount of shares and “call options” purchased, none of the Broward County men seemed to be a criminal mastermind which is most likely the reason that the penalties they incurred were minimal in the scheme of things. As explained on my Website, insider trading charges can result in much steeper fines than were levied on the five men, as well as the strong possibility of lengthy prison terms for each of them.

Basically, each of the five men had to pay the SEC the complete profits they realized plus a penalty of the same amount (100% penalty) and varying amounts in prejudgment interest for the ill-gotten gains they received. The settlement certainly could have turned out with a far more serious monetary result as well as criminal prosecution. Many settlements that are negotiated by the SEC result with penalties of up to three hundred percent of the amount in question.

Teascher gave up the $9,937 he received from his single transaction, plus a penalty of the same amount and $690 in prejudgment interest.

Palermo gave up the $124,528 he collected from his various transactions, plus a penalty of the same amount and $14,067 in prejudgment interest.

Spallina had to return the $39,156 he made in the three accounts he traded in, plus a penalty of the same amount and $1,794 in prejudgment interest.

Rosen had to give up the total of $27,634 he profited from in his personal and business accounts, plus a penalty of the same amount and $1,991 in prejudgment interest.

Markowitz, who apparently enjoyed himself the most, was separated from his money to the tune of the $32,931 in profits he made, plus a penalty of the same amount and $2,640 in prejudgment interest.

There are many defenses to charges of insider trading and in many cases an in the know federal defense attorney can negotiate a settlement with the SEC that may involve no prison time as was the case with the article above.

If you have been charged, arrested or believe there is an investigation in progress that may involve an insider trading charge against you; I am always available to help. When it is essential to immediately contact a qualified criminal defense attorney, your call will be taken 24/7 including weekends and all holidays.

My résumé includes close to a combined forty years working as an Assistant United States Attorney prosecuting cases for the government and currently practicing as a criminal defense attorney in Fort Lauderdale, Florida for almost half of that period of my professional career. On the state level, I previously held the office of Assistant State Attorney for Broward County, Florida making my law firm the logical choice to fight all allegations filed by either the State of Florida or any prosecutorial branch of the federal government.

To view my complete résumé and full list of qualifications, and understand what should be your next step if you or someone you care about is accused of insider trading or are facing any other criminal allegations, click here.