Four doctors and a nurse who practice at a Poughkeepsie hospital have been implicated in an insider trading scheme that allegedly netted them and other participants $4 million.
Doctors Slava (Stanley) Kaplan and Paul Feldman and three co-defendants were charged with criminal securities fraud in an indictment unsealed on June 29 in U.S. District Court, Manhattan. The U.S. Securities and Exchange Commission simultaneously filed a civil action against the criminal defendants.
Both actions refer to five named defendants and six unnamed individuals who also participated, including two doctors and a nurse who worked at the Poughkeepsie hospital.
Kaplan, 45, of Hopewell Junction, is a pulmonologist affiliated with Vassar Brothers Medical Center, according to online profiles. Feldman, 48, of Poughquag, Dutchess County, is a nephrologist at the hospital.
Both men pled not guilty at their arraignment. Their attorneys — Rachel Maimin for Kaplan and Michael Bachner for Feldman — declined to comment on the accusations.
The feds describe a scheme in which Joseph Dupont, a vice president at Alexion Pharmaceuticals Inc., Boston, shared sensitive, non-public information about Alexion’s plan to buy Portola Pharmaceuticals Inc. of San Francisco.
The participants, according to the criminal and civil actions, bought Portola stock and call options before the acquisition was announced when stock, for instance, was trading about $6.41 to $7.14  per share. After the announcement, when shares traded around $18, they allegedly sold their interests and reaped huge profits.
The scheme as depicted in court filings unfolded as a kind of relationship daisy chain: An insider shares sensitive information with a close friend, who shares the information with another friend, who shares it with a relative and a colleague, who shares it with two relatives and four colleagues.
Dupont, 44, of Rehoboth, Massachusetts, was Alexion’s vice president of business operations. Around January 2020, he began working on an analysis of whether Alexion could do a better job commercializing one of Portola’s drugs.
That spring, the pharmaceutical companies began discussing a deal whereby Alexion would buy Portola for $18 per share and announce the deal on May 4.
Dupont allegedly tipped off a childhood friend, Shawn P. Cronin, 43, of Dighton, Massachusetts. Cronin was a sergeant in the Dighton police department, supervised Dupont as a reserve officer, and later became its police chief.
Cronin, according to the feds, tipped off Kaplan, a friend of his and Dupont, “so that Kaplan could trade in advance of the acquisition” and “assist Cronin in formulating trading strategies to maximize Cronin’s own insider trading profits.”
Kaplan tipped off a relative and Feldman, a colleague at the hospital, according to court documents. Then Feldman tipped off two relatives, two doctors and a nurse at the hospital, and another colleague.
The Portola announcement was delayed by a day, to May 5. The share price quickly increased from $7.76 to $17.91, or 131%.
The friends, colleagues and relatives began selling and reaping.
Generally, the farther away a participant was from the original tip, the more money they made.
The civil and criminal actions are silent on whether Dupont, the insider, made any money on the Portola deal. His childhood friend, police chief Shawn Cronin, made $72,000. Cronin tipped off Kaplan, who made $472,100. Kaplan tipped off Feldman, who made $1,730,800, according to the SEC.
Collectively, Cronin, Kaplan, and Feldman allegedly spent $364,400 and made $2,274,900 in profit.
Unnamed relatives and colleagues spent $430,500 and netted $1,726,900.
Cronin also allegedly tipped off another friend, Jarett G. Mendoza, 44, of North Dighton, a sales director for a medical devices company. Mendoza, who allegedly invested $25,000 and collected a $38,600 profit, cooperated with investigators and pled guilty.
A year ago, AstraZeneca bought Alexion.
Even after the Portola announcement, the feds claim, Kaplan and Feldman tried to get more insider information.
Feldman allegedly texted Kaplan in Russian, ten days after the announcement, “Let’s hope our golden goose will continue laying golden eggs!”
The Financial Industry Regulatory Authority noticed the well-timed trades and began investigating.
Feldman allegedly texted a colleague that Kaplan “thinks he’s going to jail.” He allegedly added, “I got a good tip. No one called me when I lost a ton of $ on [a prior investment]. … So f*** them all. The world isn’t fair. … We use any edge we can get.”
The SEC is asking the court to compel Cronin, Kaplan, Feldman and Mendoza to disgorge all ill-gotten gains.
The various criminal fraud charges carry maximum prison sentences ranging from five to 25 years.
