Dr. Joseph ‘Chip’ Skowron III, a Yale graduate, was sentenced to five years of jail time for evading investment losses valued at $30 million through insider trading. He got his information from a fellow doctor, Yves Benhamou.
Skowron (42) pleaded guilty to charges of conspiring to commit securities fraud and the obstruction of justice. He admitted to taking advantage of tips that he gained through meetings with Benhamou, who had inside information about clinical drug trials. Dr. Joseph has agreed to forfeit a sum of $5 million to the government and has been ordered to pay $5.96 million as restitution for his crimes.
The authorities began to investigate Skowron after finding irregularities in the stocks of a liver disease drug maker. They then learned of the meetings between Skowron and Benhamou, a consultant to Human Genome Science Inc. According to the SEC, Skowron paid Benhamou’s hotel bills and offered him employment in the Biotech hedge fund that he was planning to start. He also gave Benhamou some free advice on investments. After this, in 2007, Benhamou began passing information to Skowron.
What is Insider Trading?
Insider trading is when people with inside knowledge of the workings of a company buy and sell their own stock based on this information. They use their insider status to make a profit. This is a breach of their fiduciary duty. ‘Tipping’ is another aspect of insider trading. This is when information that is not for public consumption is traded to people who will proceed to use it for their own profit. Insider trading commonly takes place in institutions which are privy to personal and sensitive information like brokers, banks and law firms. Government employees who use their official positions to gather inside information are also considered guilty of insider trading.
The penalty for insider trading is a fine of $1,000,00 or three times the profit the person gained by using the information. Jail time can vary according to the circumstances of the white collar crime.