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SEC, Former Biogen Idec Counsel Reach Settlement Over Stock Dumping

Posted on: Friday, 13 January 2006, 21:00 CST

By Chris Reidy, The Boston Globe

Jan. 13--The Securities and Exchange Commission reached a $3 million agreement with former Biogen Idec Inc. general counsel Thomas J. Bucknum to settle charges that he dumped stock after learning of problems with Tysabri, a multiple sclerosis drug that the Cambridge company developed.

Under a settlement subject to approval by a US District Court judge, Bucknum would neither admit nor deny wrongdoing while paying $1.9 million in disgorgement, $102,005 in interest, and a civil penalty of $969,232; he also would be prohibited from serving as an officer or a director of a public company for five years, the SEC said.

"I have resolved this matter with the SEC through a settlement," Bucknum said through a spokesman. "I believe it was prudent to end this episode now and put it behind me."

On the same day last February that Biogen Idec executives learned one patient taking Tysabri had been diagnosed with a rare and fatal brain disease and another patient was suspected of having the same disease, Bucknum exercised stock options and sold 89,700 shares of company stock at an average price of $67.12 per share, for a gross profit of $1.9 million, according to the SEC allegations.

Ten days later, Biogen Idec and its partner, Elan Corp., made the stunning disclosure that they were suspending sales of Tysabri. Biogen Idec's stock price plunged 42 percent to close at $38.65 per share.

The price fell so much that it would not have made sense for Bucknum to exercise his options after the news became public since, according to a securities filing, most of his options had exercise prices of more than $45.

Bucknum resigned from Biogen Idec on March 9, a week after Biogen Idec and Elan said they were providing information to the SEC in connection with taking Tysabri off the market. Biogen Idec declined to give a reason for Bucknum's departure.

"A key responsibility of a general counsel is to protect a company's shareholders from fraud," said Walter G. Ricciardi, deputy director of the SEC's enforcement division and district administrator of the commission's Boston office, in a telephone interview yesterday. "Yet on the afternoon of Feb. 18, 2005, Mr. Bucknum chose to dump his stock on unsuspecting shareholders after he heard about tragic developments related to the company's key drug."

Juan M. Marcelino, the Greenberg Traurig lawyer representing Bucknum, noted that his client had taken steps to sell the stock before learning of Tysabri's problems.

According to the SEC's complaint, Bucknum phoned his broker at 8:45 a.m. on Feb. 18 to say he wanted to exercise options to purchase 89,700 Biogen Idec shares and sell them; it was the broker's understanding that Bucknum wanted to sell at a price of $68 per share or better. The previous day's closing price was $67.57.

Bucknum learned of Tysabri's problems at a noon meeting.

At 1:30 p.m., with knowledge of what the SEC described as "material, nonpublic information" that could influence Biogen Idec's stock price, Bucknum instructed an associate of his broker during a phone conversation to sell the shares at the market price, then around $67, according to court filings.

"The complaint makes clear that Tom Bucknum took steps to initiate the trade prior to his knowledge of the Tysabri event," said Marcelino, a former district administrator in the SEC's office in Boston.

"We are pleased Mr. Bucknum has been able to put this matter behind him," said Biogen Idec spokesman Jose Juves, who declined to comment further.

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BIIB, ELN,

Source: The Boston Globe

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