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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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June 3, 2011

More Insider Trading at the FDA?

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Posted by Derek

Today's Wall Street Journal has the news that the Liang insider-trading case may not be the end of the story at the FDA. The SEC has amended their complaint against Liang, adding another company's stock and another relief defendant (Liang's 87-year-old father in Shanghai, who also had his name on a brokerage account). Here's a chart of his trading, for those who are interested - make note that he did manage to lose money twice, on Pozen and Mannkind, but otherwise he hit 'em over the fence, time after time, in a most unnatural manner. (The chart also backs up my earlier speculation that Liang's trading in Vanda was what rang the alarm bells - it's far and away the biggest on the whole list).

But the Journal says that "people familiar with the case" think that Liang may have involved several other federal employees. The word is also that the insider trading may have begun well before 2006, and run to a lot more money than has been totaled so far. This might account for the delay in hearing the case - it could well be that the SEC is trying to get Liang to implicate more people as part of a plea-bargain deal. Another scientist at the FDA is apparently involved, according to the paper's sources, but that's all anyone is saying.

Rather weirdly, Liang appears to have refinanced his house ten times in the last few years - four times in as many months at one point - and taken out $350,000 in equity lines against the property. I'm not sure if he was rounding up more capital for his trading business or what. . .

Comments (18) + TrackBacks (0) | Category: Regulatory Affairs | The Dark Side


COMMENTS

1. GreedyCynicalSelfInterested on June 3, 2011 1:10 PM writes...

Insider trading should be legal anyway. It goes on and this fellow was just not good at hiding his tracks. That everyone should trade on information that is available to the public as a whole is just an egalitarian fantasy.

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2. Putty on June 3, 2011 1:31 PM writes...

"Rather weirdly, Liang appears to have refinanced his house ten times in the last few years - four times in as many months at one point - and taken out $350,000 in equity lines against the property"

Blow and hookers are expensive.

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3. Anonymous on June 3, 2011 1:49 PM writes...

They don't have to be, you just need to learn how to negotiate.

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4. wwjd on June 3, 2011 1:53 PM writes...

@ GreedyCynicalSelfInterested

Murder should be legal anyway. It goes on and some are just not good at hiding their tracks.

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5. Anonymous on June 3, 2011 3:45 PM writes...

@ Putty: "Blow and hookers are expensive."

So are lawyers.

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6. I'm a computationalist on June 3, 2011 3:48 PM writes...

In Thomas Friedman's Social Contracts/Value Systems/Cultures Don't Matter Bizarro World ...

WHY DOES THE FDA EVEN EXIST?

Isn't it all about freedom to do whatever you want? I guess the FDA is like SEC: only the right scams need protection.

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7. Anonymous on June 3, 2011 8:37 PM writes...

He pulled his son into it? What a great dad!

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8. Still Scared of Dinosaurs on June 3, 2011 9:42 PM writes...

As an industry-side biostatistician I am saddened by news like this. It just gives more ammunition to the numbnuts who say that insider trading should be legal and the FDA should not exist and markets can solve the problem and all that teabag Palin-lovin' crap. I'd much rather contend with the FDA types across the table than the undergraduate business majors on my side of the table.

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9. John Thacker on June 4, 2011 8:29 AM writes...

Still Scared of Dinosaurs, must you ignore the scientific consensus? I don't think that the FDA should be abolished, but I do think that the move from safety to efficacy in 1962 did more harm than good. The post-1962 FDA has not made things appreciably safer, but the rate of progress in pharmaceuticals has become much slower. This has killed more people than it has saved. (If it were not for off-label uses of drugs already demonstrated safe, more people would have died as well.)

However, people like you simply stick to your denials and irrational prejudices rather than being willing to read the research and literature.

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10. Random Chemist on June 5, 2011 1:08 PM writes...

Mr. Liang is lucky to be in the US. Had he been caught committing these crimes in China, he would have been executed after a show trial like Zheng Xiaoyu (the disgraced ex-Director of the State Food and Drug Administration). Considering the rampant corruption within the Chinese government, perhaps execution (bullets and "labor" at the expense of the covicted's family) is not an effective deterrent to white-collar crime...

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11. Nile on June 5, 2011 5:54 PM writes...

Repeatedly refinancing (or remorgaging) his house?

Advanced economies have a central register of 'charges', or loans secured upon an asset.

It looks like North American lenders are still eager to extend a loan for property, without regard for basic checks for fraud.

In short: the banking crisis is still happening.

As for Mr. Liang, he probably has a pretty good way of laundering the cash offshore: it's an essential insider-trading business skill. Setting up a chain of frauds which will inevitably fail is *not* good business practice: it suggests an 'end-game' phase, a grab for the last of the easy money and a plan to change his name and travel to the Caribbean to spend more time with his money.

I wonder if the SEC will find any of it?

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12. Dead Parrot on June 5, 2011 9:11 PM writes...

The FDA employs about 10,000 people. Getting rid of it now would really hurt the job numbers.

The government needs to grow more, not less. I suggest a Ministry of Silly Walks. Such an agency would easily require 50,000 employees.

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13. Sigh Young on June 5, 2011 11:39 PM writes...

@John Thacker: ever heard of post hoc ergo propter hoc? It describes your logic well. One biased libertarian website does not scientific consensus make, although it may represent the consensus of people who think as you do. Avoiding your Koolade is no irrational prejudice, but is instead merely good judgement at work.

I'm amazed at the loony birds who want to shut down the FDA. Let's see, it would be so much easier if consumers could just make their own decisions. Even assuming the average doctor or consumer is armed with degrees in biostatistics and willing to spend hours browsing trials websites to determine whether or not a candidate is safe or effective, the problem is those trials and that data is what they are crusading to eliminate! So costly, let's get rid of it. We will just use our good judgement, which is based on...what? Oh, a Phase I-equivalent trial based on a few dozen carefully chosen people. It's clear from current practice that small trials are unerring indications of safety and efficacy, right? This argument must have come from the Ministry of Silly Talks. I will grant this, though: it would likely produce lots of "blockbuster" drugs with amazing claims of efficacy. If, that is, you can swallow the excrement.

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14. emjeff on June 6, 2011 7:12 AM writes...

As usual, people will use this one example of a bad actor to indict the whole Agency. The industry would be well-served by a strong, scientifically-driven FDA. We don't have that, unfortunately, but we would be ill-served if we had nothing.

For those old enough to remember the generic drug scandal of the 1980s, this is deja vu all over again, but with more opportunities for mischief. What if, for example, someone inside knew a drug was not going to be approved and shorted the stock? How could the FDA prove that the lack of approval was for scientific reasons and not for gain by the insiders. I predict lots and lots of lawsuits.

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15. Anonymous on June 6, 2011 5:11 PM writes...

John Thacker--post of the year. No, make that post of the century.Good Lord.

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16. Still Scared of Dinosaurs on June 6, 2011 7:00 PM writes...

Wow. I went away for the weekend and started to feel bad about being too strong in expressing my opinions. Fun to type, not necessarily smart to post. Then Mr. Thacker proved you really can't be too strident responding to wingnut ideas. "Scientific concensus"? This from the types who deny that the earth is warming up.

Dude, feel free to start riffing on my handle and call yourself "Still Denying Dinosaurs".

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17. MoMo on June 7, 2011 1:07 PM writes...

Still Scared- don't loose sleep over Thackers comments and his consensus website. The fact that one of their members are part of NORML tells volumes about their anti-FDA fervor and their motivation.

Probably great guys to party with, but I wouldnt let them dose my dogs with munchie treats, they would probably chow them down first.

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18. hibob on June 9, 2011 5:34 PM writes...

How about we legalize insider trading with the proviso that all "insider" buying/selling/exercising/changes to scheduled trading plans have to be publicly announced 1 full market day before they are executed, and cannot be cancelled once announced. Allow them to set hi/low limits on the orders, sure, but no departing from the order once it's announced, and the limits have to be part of the announcement. I.e., live by the sword, die by the sword.

In the meantime, get rid of the loopholes allowing changes to scheduled trading plans during insider trading blackout periods.

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