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Was Thomas Bucknum’s insider trading only half wrong? In a January settlement with the Securities and Exchange Commission, Bucknum agreed to disgorge the $1.9 million that he made on an inside trade last year while GC of Biogen Idec Inc. The SEC also levied a penalty of $900,000 � roughly half the amount of Bucknum’s gains. In past similar insider trading cases, the SEC has usually sought a penalty equal to the full amount of the gains. The SEC claims that Bucknum ordered his broker to complete a sale of Biogen stock within two hours of learning material negative information about one of the company’s drugs. Bucknum neither admits nor denies wrongdoing in the settlement, which also bars him from serving as an officer or director of a public company for five years. Walter Ricciardi, district administrator of the SEC’s Boston office, wouldn’t comment specifically on why Bucknum got hit with a proportionally smaller penalty than average. But Ricciardi noted that in assessing penalties, the agency generally considers not just the facts, but also “the egregiousness of the misconduct . . . and the degree of premeditation.” (At press time Ricciardi was scheduled to become the SEC’s deputy director of enforcement in its Washington, D.C., headquarters.) In Bucknum’s case, it seems that the SEC was influenced by the fact that he initiated his stock sale before he heard the bad news about the Biogen drug. Bucknum’s lawyer, Juan Marcel Marcelino, says, “There was a uniqueness to this set of factual circumstances that allowed the SEC to show some leniency here.” Marcelino, a Boston-based of counsel at Greenberg Traurig, previously held Ricciardi’s post as head of the SEC’s Boston office. According to the SEC’s complaint, Bucknum spoke with his broker at 8:45 a.m. on February 18, 2005, and asked him to exercise options to buy and then sell 89,700 shares of Biogen stock at $68 a share. By 10 a.m., the broker’s assistant had obtained the requisite approval for the trade from Biogen’s legal department and phoned Bucknum. Had the GC given the go-ahead then, he wouldn’t have run afoul of the SEC. But Bucknum missed that call. Two hours later, in a noon meeting with Biogen medical, regulatory, and drug safety personnel, the SEC says that Bucknum learned disturbing news about Tysabri, a Biogen treatment for multiple sclerosis. One and possibly two patients in a clinical trial of the drug had developed a rare and often fatal brain disease. Bucknum then conferred with Biogen’s CEO and chairman, after which the company scheduled an emergency meeting of its board by phone. At 1:30 p.m., according to the SEC’s complaint, Bucknum returned the call to his broker, whose assistant informed Bucknum that the GC’s proposed transaction had legal department approval, and that the stock was trading “near $68.” Bucknum authorized the order at the market price (a change from the terms he’d specified that morning). Ten days later, Biogen pulled Tysabri from the market. (One patient in the clinical trial has since died, though it’s unclear whether the drug caused the death.) Biogen stock sank 40 percent, and shareholders lost billions. On March 9, faced with questions from regulators and a shareholders’ suit, Bucknum resigned, suspending a legal career that included a prior stint as GC of DuPont Merck Pharmaceutical Company. Insider trading reports show that other Biogen executives reaped even greater profits in stock trades on February 18. Unlike Bucknum, however, their transactions were part of scheduled buy-and-sell plans, and were therefore immune from SEC action. Regardless of any mitigating factors in Bucknum’s case, the SEC’s Ricciardi says that general counsel “have a special responsibility to protect shareholders from fraud. Where they fail to fulfill that special responsibility, the appropriate sanctions may be forthcoming.”

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