Ex-FDA chemist gets 5 years for insider trading

Mon Mar 5, 2012 5:46pm EST

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* Profits and avoided losses totaled $3.77 million

* Liang used FDA database containing confidential documents

By Jeremy Pelofsky

WASHINGTON, March 5 (Reuters) - A U.S. Food and Drug Administration chemist on Monday was sentenced to five years in federal prison after pleading guilty to insider trading by using confidential information about drug approvals.

Cheng Yi Liang, 58, admitted buying and selling stock in more than two dozen companies with confidential FDA information to rack up just over $3.77 million in profits and avoid losses between July 2006 and March 2011.

He pleaded guilty to two counts of securities fraud and making false statements. His son was also initially charged in the case but prosecutors later dismissed those charges.

U.S. District Judge Deborah Chasanow in Greenbelt, Maryland, sentenced Liang to the five-year prison term, to be followed by three years of supervised release. He was previously ordered to forfeit the proceeds from his scheme.

"For years, he exploited his position in the agency to make easy money on the stock market. But today's sentence shows that easy money has consequences," said Lanny Breuer, head of the Justice Department's criminal division.

Federal sentencing guidelines call for a sentence of 57 to 71 months, and prosecutors had recommended that he received a sentence at the high end of the range.

In the scheme, Liang reviewed documents about the progress of experimental drugs, using an FDA database that includes confidential and non-public documents about trials, studies and correspondence, according to court papers.

He then made the trades based on that information using his home computer or on an Apple iPad, sometimes using trading accounts belonging to friends and relatives, including his son.

Information about prescription drug approvals or denials can prompt big stock swings and has been the subject of insider trading investigations previously. However, it is rare for such a case to involve a government employee.

Liang resigned his position and his conduct led the FDA to take steps to prevent such activity from happening again.

The case is USA v Cheng Yi Liang, No. 11-cr-530, in U.S. District Court for the District of Maryland. (Reporting By Jeremy Pelofsky; Editing by Steve Orlofsky)

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