Insider trading investigation eyes Abbott/Advanced Medical Optics deal
An ongoing insider trading investigation focused on Abbott Labs' ($ABT) $3 billion acquisition of Advanced Medical Optics in 2009 is getting extremely juicy.
Among the revelations in a great Los Angeles Times scoop on the piece: The U.S. Attorney's office in Los Angeles is specifically looking at the relationship between a Goldman Sachs banker and ex-Galleon Group hedge fund employee relating to the deal. Even more ominous: Prosecutors aren't just looking at Abbott's purchase of the medical-device eye technology firm. They're eyeing M&A activity in the medical devices industry at large, according to the story (larger scandal to come later).
But first, lets talk about the Goldman Sachs/Galleon revelation. The U.S. Attorney's office is exploring the ties between Matthew Korenberg, a Goldman Sachs managing partner who worked on the deal, and Paul Yook, an ex-Galleon portfolio manager, a "person briefed on the matter" told the newspaper. Yook was not reachable for comment for the story. But the report notes that Korenberg's attorney, John Hueston, of the law firm Irell & Manella, would not comment on his client's relationship with Yook, though he denied the man committed any wrongdoing.
One clue to the case came out last week, according to the story, in the ongoing case against Rajat K. Kupta, a former Goldman director accused of leaking inside information to Galleon leader Raj Rajaratnam. That's when Gupta's attorney disclosed that "a senior Goldman banker" is under investigation, though his or her identity was not named. Hueston told the newspaper that Korenberg had no connection to that case and that an internal Goldman investigation as well as an ongoing SEC investigation of Korenberg "has gone nowhere and found nothing wrong."
The case has led to at least one settlement. Former Los Angeles Angels baseball player Doug DeCinces, while not admitting any wrongdoing, agreed in August to pay $2.5 million to settle an SEC civil suit, alleging he used an illegal tip to make big bucks on Advanced Medical stock, according to the Times.
Interestingly, the Advanced Medical Optics investigation likely won't be the end of it. This brings us back to the Times' source briefed on the investigation, someone "not authorized to discuss the case publicly." The individual told the newspaper that the investigation is only the tip of the iceberg, because prosecutors are actively looking at M&A activity in the medical device industry at large. So definitely, there will be more to this story before long.
- read the Los Angeles Times piece