A federal court has denied Pfizer's request to recover $75 million
Federal Judge Victor Marrero has rejected Pfizer's effort to recover $75.2 million left over from a settlement with the U.S. Securities and Exchange Commission (SEC) in an insider trading case linked to billionaire Steven A. Cohen. The court ruled that the pharmaceutical company Wyeth, which Pfizer bought in 2009, was not a victim of the financial fraud that was at the heart of the case and therefore not entitled to the funds.
Judge Marrero ordered that the amount in question be transferred to the account of the US Treasury, as requested by the SEC. Pfizer $PFE and its attorneys have not yet commented on the verdict.
The case involved a $602 million civil settlement reached by the SAC over Wyeth and pharmaceutical company Elan's stock trading. The trades were made by Mathew Martoma, who worked for a unit of SAC and was later convicted of insider trading. He obtained this information from a neurologist, Sidney Gilman, who was involved in a clinical trial of an Alzheimer's drug in 2008.
SAC Capital pleaded guilty to fraud in 2013 and paid $1.8 billion in settlements with the SEC and other authorities. The SEC had $75.2 million available to it after compensating Wyeth and Elan investors, which Pfizer claimed on the grounds that Gilman had breached his fiduciary duty to Wyeth, where he served as a consultant.
However, the judge ruled that the damage to Wyeth's reputation did not constitute financial harm that would entitle it to the funds. "The court agrees that companies whose secrets are misused for insider trading are victims of wrongdoing," Marrero said. "However, Pfizer has failed to demonstrate how insider trading and the resulting harm to Wyeth's reputation constitutes financial harm that would justify distribution of the recovered funds."
The judge also emphasized that the $7 billion drop in Wyeth's market value that occurred after the drug's test results were released was not related to insider trading because the activity did not come to light until three years later.
Steven A. Cohen, the founder of SAC Capital, was not prosecuted in the case but agreed to a two-year ban on managing money for outside investors to end the SEC investigation. He changed the fund's name to Point72 Asset Management in 2014 and stopped trading for the fund in September 2024. According to Forbes magazine, Cohen has a net worth of $21.3 billion.
Disclaimer: You will find a lot of inspiration on Bulios, but stock selection and portfolio construction is up to you, so always do a thorough analysis of your own.
Source: CNN, Yahoo.