Morgan Stanley Aventura adviser charged in Pharmasset insider case
Former Morgan Stanley brokerage adviser Kevin L. Dowd was charged with insider trading for tipping a friend ahead of Gilead Sciences Inc.'s $11 billion acquisition of Pharmasset Inc., U.S. prosecutors said.
Dowd, 37, who worked at a brokerage in Aventura learned that a Pharmasset director told Dowd's superiors about the deal before it was announced on Nov. 21, 2011, according to a Federal Bureau of Investigation arrest complaint filed Monday.
Dowd was told not to act on the information yet tipped a childhood friend, identified as J.F., who illicitly made $163,621 on Pharmasset shares, the FBI said. J.F. tipped another friend who made $544,706 on Pharmasset options, the FBI said. In July 2012, agents confronted Dowd, who said he told J.F. to buy 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," Paul Fishman, the U.S. attorney in New Jersey, said in a statement.
The number of people sued by the U.S. Securities and Exchange Commission or charged with insider trading by the Justice Department more than doubled since 2008, according to data compiled by Bloomberg. There were 56 in 2008, 96 in 2009, 67 in 2010, 104 in 2011 and 125 last year. Of those, 22 percent were linked to trades involving health-care stocks.
In exchange for the tip, J.F. gave Dowd a wooden dock for his Jet Skis and a cashier's check for $35,000, according to the FBI. Dowd used the money to buy an in-ground pool at his Boca Raton home, according to the FBI.
Dowd, who was arrested at his home Monday, is charged with conspiracy to commit securities fraud and faces as long as five years in prison if convicted.
He appeared Monday in federal court in West Palm Beach. A judge released Dowd on a $100,000 bond. He is scheduled to appear in federal court in Newark on Feb. 1.
Peter Willis, a lawyer for Dowd, didn't immediately return a call seeking comment on the charges.
The SEC also sued Dowd Monday in federal court in Newark.