If you've ever thought about going to a meeting of experts advising the Food and Drug Administration on whether to approve a new drug, be prepared to fight your way through the crowd of Wall Street types looking for scraps of information to trade on. The tiniest tidbit can be worth a lot of dough.
Now imagine you could get to the mother lode of FDA info about a drug — a computer system that tracks approval applications, including memos that explain what the agency is about to do before it goes public. That would really be valuable!
Well, an FDA chemist named Cheng Yi Liang had access to the database and with the help of his son, Andrew Liang, allegedly used insider information to make profits of more than $2.27 million. In a criminal complaint, the Justice Department alleges the men engaged in securities and wire fraud and a conspiracy to commit the frauds.
The pair allegedly began trading on the insider information in November 2007 and continued doing so until this month. The Justice Department says they made money trading in shares of:
- Clinical Data
- Vanda Pharmaceuticals
- Progenics Pharmaceuticals
- Middlebrook Pharmaceuticals
- Momenta Pharmaceuticals
The two men were arrested at their home in Gaithersburg, Md., Tuesday and were arraigned in U.S. District Court in nearby Greenbelt. Seeking comment, Shots called a telephone number listed for their residence. A man answering the phone said no one by the name of Cheng Yi Liang was there.
"Profiting based on sensitive, insider information — as Liang is charged with today — is not only illegal, but taints the image of thousands of hard-working government employees," said Special Agent in Charge Elton Malone of Health and Human Services-OIG Special Investigations Branch in a statement. "We will continue to insist that federal government employee conduct be held to the highest of standards."
In an internal FDA e-mail, Janet Woodcock, head of the Center for Device Evaluation and Research, wrote to employees today:
As part of the ongoing investigation, federal agents are interviewing a number of other CDER staff and collecting documents and files. The Agency is cooperating fully with law enforcement officials regarding this matter and I encourage any of you who are contacted to cooperate fully as well.