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Monday, June 24, 2024 | Back issues
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Inside Trader Gets 5 Years to Repent

MANHATTAN (CN) - A hedge fund manager who says he found Jesus after he was indicted was sentenced Friday to five years in prison for inside trading and obstruction of justice. Joseph "Skip" Skowron III quit being a doctor to become a portfolio manager and inside trader.

Prosecutors said Skowron used inside information he got from Yves Benhamou, a doctor who served as an adviser on a clinical drug trial, to avoid $30 million in trading losses.

Skowron also lied and urged Benhamou to lie to the SEC during its investigation of Skowron's trading. He pleaded guilty in August to conspiracy to commit securities fraud and obstruct justice.

Because of his medical training, Skowron advised the hedge fund on medical investments, including investments in Human Genome Sciences. Benhamou, an expert on hepatitis, was on a committee that oversaw a Human Genome clinical trial of a drug called Albuferon. He also worked as a consultant for an "expert networking firm" through which he was put in contract with hedge fund managers, including Skowron.

Skowron paid Benhamou for inside information, and Benhamou provided it. But he didn't pay him much, according to the U.S. Attorney's Office: 5,000 euros in cash during a meeting in Barcelona, $4,624 in expenses for a New York City hotel room, and he offered to put him on retainer.

After Benhamou learned that Human Genome Sciences was canceling its clinical trial because of serious side effects, he tipped Skowron, who told a hedge fund trader to "sell the hgsi ... all of it," according to the U.S. Attorney's Office.

"While on the phone with Benhamou, Skowron sent an instant message to a trader at the Hedge Fund, urging him to sell the remaining HGSI shares more quickly. As a result of those communications, Skowron caused the Hedge Fund to sell more than 6 million shares of HGSI, thereby avoiding approximately $30 million in losses," the U.S. Attorney's Office said in a statement.

"In addition, Skowron and Benhamou undertook efforts to conceal the insider trading scheme from regulatory authorities. Specifically, beginning in February 2008 after the SEC began investigating the Hedge Fund's trading in HGSI stock, Skowron lied to the SEC and induced Benhamou to lie to the SEC by falsely denying that they had discussed the serious adverse events before they were made public."

As part of his plea agreement Skowron, 42, of Greenwich, Conn., must forfeit $5 million, pay a $150,000 fine, and pay restitution of $5.96 million.

Benhamou pleaded guilty in April to conspiracy to commit securities fraud, securities fraud, conspiracy to obstruct justice and making false statements to the FBI. He will be sentenced on Dec. 8.

Speaking at his sentencing hearing, Skowron called the charges "a blessing because I have turned my life over to Christ," The New York Times reported on Saturday.

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