NEWARK, New Jersey (AP) — Executives at two leading drug companies were among six people arrested Monday and charged with insider trading in what federal prosecutors said was a five-year-long scheme that netted more than $1 million.
Among those charged were 42-year-old John Lazorchak, director of financial reporting at Celgene Corp., a biotech drug maker based in Summit; and Mark Cupo, 51, who held a similar position at Sanofi-Aventis, a France-based pharmaceutical company with U.S. headquarters in Bridgewater.
Along with 42-year-old Mark Foldy, a high school friend of Lazorchak's who was a marketing executive with Stryker Corp., a medical technology company, they passed privileged information on their companies' merger and acquisition plans, financial results and regulatory applications to others who would make stock trades based on the information, according to the criminal complaint released Monday.
Lazorchak faces 26 counts of securities fraud and Cupo faces 23. Each count carries a maximum prison sentence of 20 years. Cupo faces one conspiracy count and Lazorchak and Foldy face two apiece.
"Investors have entrusted their life savings to the integrity of financial markets and the belief of a level playing field," Michael Ward, special agent in charge of the FBI in New Jersey, said in a statement. "Insider trading corrupts the process and tilts the playing field in favor of those privileged few with access to information not available to the public, and at the expense of unsuspecting and unknowing investors."
According to the criminal complaint, Lazorchak tipped Cupo to Celgene's impending purchase of Pharmion in 2007. Cupo then allegedly told two friends, Lawrence Grum of Livingston and Michael Castelli, who made stock trades based on the information.
Lazorchak also allegedly passed the information to Foldy and Michael Pendolino, a Nashua, New Hampshire, chiropractor who was a high school friend of Lazorchak's. Foldy and Pendolino tipped off friends and family members, the criminal complaint alleges.
Grum, 48; Castelli, 48, and Pendolino, 43, each face conspiracy and multiple securities fraud counts.
Other deals described in the complaint as being the subject of insider trading included Celgene's acquisition of Abraxis, Stryker's acquisition of Orthovita Inc. and Sanofi's acquisition of Tennessee-based Chattem Inc., maker of Gold Bond skin products and Icy Hot pain relief packs.
All six defendants were scheduled to make initial appearances in U.S. District in Newark on Monday afternoon. Via email, Foldy's attorney declined to comment; attorneys for the other five defendants didn't respond to emails.
A spokesman for Sanofi said Cupo resigned from the company "very recently." He said Cupo worked in the finance department as a senior director, a middle-management position, but was unsure how long Cupo was employed there. Sanofi is cooperating with the investigation, the spokesman said.
A spokesman for Celgene said in an email the company terminated Lazorchak on Monday.
"Celgene continues to cooperate fully with authorities on this matter and it is our understanding that the investigation involved only one employee and not the Company itself," spokesman Greg Geissman said. "Celgene is currently exploring its legal remedies. The actions taken by this employee violate Celgene's values, guiding principles and formal policies."
AP Business Writer Linda A. Johnson contributed to this story from Trenton.