March 6 Federal securities regulators have won a partial victory against two brothers accused of trading on inside information in 2009 about French pharmaceutical company Sanofi's plan to buy a Tennessee-based company.
A jury in the U.S. district court in Cleveland, Ohio, found that Andrew Jacobs and Leslie Jacobs committed insider trading in the context of a tender offer, the U.S. Securities and Exchange Commission announced in a statement.
At the same time, the jury also found that the brothers were not liable under a broader insider trading statute not specific to tender offers, Ned Searby, a lawyer for Leslie Jacobs, said.
The decision is the latest in a string of mixed jury verdicts that highlight how difficult it can be for the SEC to obtain clear-cut victories in complex securities cases.
Searby said in an email: "We do not understand the basis for the verdict and we are considering our options."
David Wilson, a lawyer for Andrew Jacobs, declined to comment.
In its civil lawsuit, filed in June 2013, the SEC said Andrew Jacobs learned of Sanofi's plan to make a tender offer for Chattem Inc from his brother-in-law who was an executive at the U.S. maker of allergy medicines.
The SEC said that although Andrew Jacobs agreed to keep the discussion confidential, he called his brother, Leslie, the next day and told him the company was going to be acquired. Days later, Leslie purchased 2000 shares of Chattem for around $137,000, which he sold after the deal was announced for a profit of over $49,000, the complaint said.
The lawsuit alleged violations of the Securities Exchange Act and sought monetary penalties as well as an order barring Andrew Jacobs from serving as an officer or director of a public company. At the time of the tip, he was a high-level executive of a public company, the SEC said.
"The defendants were found to have violated one of the Commission's core anti-fraud provisions that is aimed at protecting the investing public by preventing those with insider knowledge from illegally profiting from their fraudulent trading," SEC enforcement director Andrew Ceresney said in a statement on Thursday.
The lawsuit is at least the eighth case the commission has brought alleging insider trading connected to Sanofi's acquisition of Chattem.
The case is SEC v. Jacobs et al, U.S. District Court for the Northern District of Ohio, No. 13-1289. (Reporting by Terry Baynes in New York; Editing by Edwina Gibbs)