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| Joseph Skowron |
It’s not been a good year for people associated with SAC Capital Advisors. Just yesterday we featured a story involving SAC fund manager Donald Longueuil, who is seeking to dismiss charges against him. This morning, another SAC alumnus and current healthcare chief at FrontPoint Partners, Joseph Skowron, surrendered to Federal Bureau of Investigation agents and was arrested.
Skowron is charged with receiving inside tips from well-known kidney doctor Yves Benhamou regarding negative Hepatitis-C drug test results at Human Genome Sciences. Dr. Benhamou has already pleaded guilty to prosecutors on Monday in an arrangement worked out with the U. S. Attorney’s Office. The doctor had consulted at half a dozen hedge funds before his arrest last November.
Dr. Benhamou transmittal of confidential information allowed Skowron to save his firm $30 million in losses on Human Genome Sciences by selling 3.3 million shares in January 2008, ahead of the drug trial announcement. When reporters linked Benhamou’s arrest to FrontPoint, investors jumped ship and forced the hedge fund to close down its healthcare unit and firing all its employees. Skowron went on leave sat that time.
Seeking to rehabilitate Dr. Benhamou’s reputation, his lawyer David Zornow offered the following spin:
"Dr. Benhamou has acknowledged his serious mistakes in judgment and intends to live up to his obligations under his cooperation agreement. Dr. Benhamou's conduct in this instance must fairly be considered in the overall context of his extraordinary contributions to his patients and to medical science."
Whatever.
For its part, FrontPoint maintains it is fully cooperating with the ongoing probe. Skowron is almost certainly the most educated prisoner on the cell block, as attested to by his Ph.D. in biology from Yale. His journey from Yale to jail demonstrates once again that hedge fund crime doesn’t pay – if you get caught!
UPDATE April 14
Skowron was released on bail today, even as he was slapped with a SEC civil suit to accompany his criminal indictment. Meanwhile, his firm, FrontPoint Partners, will pay a $33 million settlement to the SEC for their role in the case. This includes $29 million in disgorgement and $4 million in interest.
UPDATE April 14
Skowron was released on bail today, even as he was slapped with a SEC civil suit to accompany his criminal indictment. Meanwhile, his firm, FrontPoint Partners, will pay a $33 million settlement to the SEC for their role in the case. This includes $29 million in disgorgement and $4 million in interest.
© 2011 Hedge Fund Writer LLC
