Pfizer may not be able to recover the $75.2 million that was left from a Securities and Exchange Commission insider trading settlement with SAC Capital Management.
Reuters reported that U.S. District Judge Victor Marrero in Manhattan denied the petition of Pfizer to recoup the left over from the settlement with billionaire Steven A. Cohen owned hedge fund, citing that Wyeth, which was acquired by Pfizer in 2009, did not meet the criteria to be called as a victim of the violation of SEC rules.
Absent this eligibility, it cannot be duly made a recipient of the funds, and that it will be the state that shall benefit from it.
According to Reuters, the case was rooted on a civil settlement for insider trading, between convicted Mathew Martoma and two drug companies, Wyeth and Elan. Martoma was a former portfolio manager at SAC, who engaged in "illegal trades in pharmaceutical stocks" based on tips that he received from neurologist, Sidney Galman, about a clinical trial for an Alzheimer's drug.
The hedge fund pleaded guilty to fraud in 2013 and paid the SEC and other authorities $1.8 billion. After making payments to investors of Wyeth and Elan for the losses they sustained from the illegal trade, Pfizer now claims that the leftover of $75.2 million duly belongs to it. The drug company grounded its argument on a breach of the fiduciary trust by Galman to Wyeth, where he was a consultant.
However, the position of the Pfizer did not appeal to the judge, who said that while Wyeth may have suffered reputational harm because of the scandal, it does not equate to financial harm, U.S. News reported.
In the decision, the judge underscored that it believes that a corporation whose secrets were misappropriated because of insider trading is a victim of a wrongdoing. However, in terms of distributing whatever is left of the settlement, Pfizer failed to show the court how the insider trading scheme, which resulted in reputational harm can qualify as pecuniary harm. Having failed to show the court such, then Pfizer could not be made an eligible recipient for the remaining funds.
Marrero also noted that the decline in Wyeth's market value by $7 billion subsequent to the drug trial cannot be linked to the insider trading scheme, which only became public three years later.
Cohen was not charged criminally but he agreed to a two-year ban that would prohibit him from managing other people or entity's money in order to end the investigation of the SEC.
