--Bristol executive allegedly traded options in drug maker's
acquisition targets
--Executive allegedly made more than $300,000 in profits from
trading
--Bristol places executive on leave immediately
(Adds details about executive's court appearance beginning in
6th paragraph; details about option trades in 18th graph.)
By Peter Loftus
Federal authorities arrested a Bristol-Myers Squibb Co. (BMY)
executive Thursday on charges he used confidential information
about the drug maker's acquisition targets to make more than
$300,000 in illicit profits from stock-option trading.
The U.S. Attorney's Office in New Jersey charged Robert
Ramnarine, the drug maker's assistant treasurer for capital
markets, with three counts of insider-trading securities fraud. The
Securities and Exchange Commission filed parallel civil charges
against Mr. Ramnarine.
Bristol-Myers issued a statement Thursday saying Mr. Ramnarine
has been placed on administrative leave effective immediately.
"Bristol-Myers Squibb has clear and strict policies prohibiting
trading on material non-public information and is cooperating with
the government's investigation," the company said.
The 45-year-old Mr. Ramnarine, of East Brunswick, N.J., is
accused of purchasing options in three companies that Bristol was
targeting: ZymoGenetics Inc., Pharmasset Inc. and Amylin
Pharmaceuticals Inc. (AMLN). Bristol-Myers purchased ZymoGenetics
for $829 million in 2010 and agreed in June to acquire Amylin for
$5.3 billion. Gilead Sciences Inc. (GILD) bought Pharmasset for $11
billion earlier this year.
The criminal complaint filed against Mr. Ramnarine in U.S.
District Court in New Jersey also accused the defendant of lying
about which drug company he worked for and doing online searches
about insider trading in the options market.
FBI agents arrested Mr. Ramnarine Thursday morning. He was
released on bail after an initial appearance in federal court in
Newark, N.J., Thursday afternoon. At the hearing, Mr. Ramnarine was
advised of his rights and assigned an assistant public defender to
represent him, according to court documents.
Neither Mr. Ramnarine nor his attorney could be reached for
comment.
Mr. Ramnarine served as director and executive director of
pensions and savings investments at Bristol-Myers from 2008 until
July 2012, when he was named assistant treasurer of capital
markets, according to the complaint.
The executive was involved in evaluating potential Bristol-Myers
acquisition targets in those roles, the complaint said, and had a
duty not to use material, nonpublic information for his personal
benefit.
According to the complaint, Bristol-Myers began negotiating with
ZymoGenetics about a deal in May 2010, and announced an agreement
in September 2010. Before the public announcement, Mr. Ramnarine
purchased ZymoGenetics call options, which he sold after the
announcement for a profit of $30,551, according to the
complaint.
Bristol-Myers also explored a potential acquisition of
Pharmasset in October and November of 2011 before withdrawing from
discussions, which cleared the way for Gilead's acquisition,
according to the complaint.
Before the November announcement of the Gilead purchase of
Pharmasset, Mr. Ramnarine purchased Pharmasset call options that
eventually netted him about $225,026 in illicit profits, the
complaint said.
According to the complaint, Bristol-Myers made a preliminary
offer to acquire Amylin for $25 to $27 per share in May, ultimately
agreeing to pay $31 per share in June. Before the public
announcement, Mr. Ramnarine purchased Amylin options that resulted
in profits of $55,784, according to the complaint.
Federal authorities also alleged Mr. Ramnarine took steps aimed
at trying to conceal his conduct. In early November 2011, before he
purchased Pharmasset options, Mr. Ramnarine conducted Internet
searches on a Yahoo site from his Princeton, N.J., office related
to avoiding detection of insider trading, according to court
documents.
The search terms included: "can option be traced to purchaser"
and "can stock option be traced to purchase inside trading,"
according to the complaint. Prosecutors said Mr. Ramnarine also
viewed a 2005 press release about SEC allegations of insider
trading surrounding Reebok shares.
The complaint said in 2010, Mr. Ramnarine falsely stated he
worked for Merck & Co. (MRK) in an application to trade options
in a Scottrade account, which he used to purchase some of the
ZymoGenetics options.
"Ramnarine tried to educate himself about how the SEC
investigates insider trading so he could avoid detection, but
apparently he ignored countless successful SEC enforcement actions
against similarly ill-motivated individuals who paid a heavy price
for their illegal trading," Daniel M. Hawke, chief of the SEC
Enforcement Division's Market Abuse Unit, said in a press
release.
In the case of Amylin, Mr. Ramnarine turned to the option market
to make bets that would benefit from Amylin shares climbing
higher.
In May and June, Mr. Ramnarine sold "put" options, which granted
buyers the right to sell Amylin shares to him at a set price, and
he purchased "call" options, which gave him the right to buy Amylin
shares at a set price.
At the time he started trading in Amylin options in late May,
Amylin shares were trading around $25.80. He began to sell put
options and, as the final deal got closer to getting announced in
late June, he purchased call options. Both moves profited as Amylin
shares rose about 19% from late May until July 2.
By the time that Bristol-Myers agreed to acquire Amylin for $31
per share cash, in a deal announced June 30, Mr. Ramnarine had
closed some of his option positions. He closed the remaining
positions on the first trading day after the deal was announced,
when Amylin shares climbed to $30.71.
In all, the sale of 710 put options and purchase of 130 call
options net Mr. Ramnarine $55,784 over the course five weeks.
Each of the three counts of criminal securities fraud carries a
maximum potential penalty of 20 years in prison and a fine of $5
million, according to the U.S. Attorney's Office in New Jersey.
The SEC is seeking a court order to freeze Mr. Ramnarine's
brokerage account assets, among other sanctions.
--Kaitlyn Kiernan contributed to this article.
Write to Peter Loftus at peter.loftus@dowjones.com
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