SEC Files Another Insider Trading Administrative Proceeding

The SEC filed another settled insider trading action as an administrative proceeding. The Commission has increasingly been filing insider trading cases in an administrative forum this year. In the Matter of Eric J. Wolff, Adm. Proc. File No. 3-17173 (March 16, 2016).

This action centers on a tender offer by Merck & Co. for the shares of Idenix Pharmaceuticals, Inc., announced on June 9, 2014. Mr. Wolff resides with, and is the life partner of, Individual A, an employee of Merck.

The transaction traces to December 2013 when Merck initially expressed an interest in reviewing certain clinical trial data regarding an Idenix drug under development to treat Hepatitis C. In late February the two firms entered into a confidentiality agreement under which Merck could review the data. The firms held discussions about the companies and the drug over the next two months.

In early May 2014 Merck made an unsolicited offer to acquire Idenix for $9.78 per share. Idenix told Merck it had other firms interested in a possible deal. Two days later, on May 15, a confidentiality and standstill agreement was executed by the two firms and due diligence began. Financial advisers were retained. Due diligence continued into early June.

On May 18 Merck requested that Individual A work on a highly confidential matter regarding Merck’s evaluation of another firm’s drug to treat Hepatitis C. Individual A understood the project involved a potential business arrangement between Merck and the other firm. Mr. Wolff and Individual A discussed the assignment – the two had a history of sharing confidential information. Shortly after Individual A began working on the project he confirmed that the other firm was Idenix. Mr. Wolff understood, based on his experience, that the project involved a potential merger. On May 21, 2014 Mr. Wolf purchased 5,000 shares of Idenix stock.

In late May Idenix asked Merck and the two other firms to submit proposals by June 3. Ultimately the board of Idenix agreed to accept the Merck offer. When the deal was announced on June 9, 2014 the share price of Idenix stock increased by 229% over the previous close. Mr. Wolff had trading profits of $87,000. The Order alleges violations of Exchange Act Sections 10(b) and 14(e).

To resolve the matter Mr. Wolff consented to the entry of a cease and desist order based on the Sections cited in the Order. In addition, he will pay disgorgement of $87,600, prejudgment interest and a penalty in an amount equal to the disgorgement.

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