A former hedge fund manager who used his medical training to earn millions of dollars trading in health care stocks was sentenced in Manhattan on Friday to five years in prison for using inside information to escape big losses.
Joseph F. “Chip” Skowron III, 42, who once worked for FrontPoint Partners LLC, was sentenced by U.S. Judge Denise Cote of the Southern District of New York, who told the contrite defendant that his crimes “caused investors to lose money, undermined the integrity of the U.S. securities laws and caused many people to lose jobs,” according to a New York Times account.
Skowron, who pleaded guilty in August to conspiracy to commit securities fraud and lying to the Securities and Exchange Commission to cover up his wrongdoing, lamented how he “slipped into a world of relativism where the ends were justifying any minds,” according to the Times.
Preet Bharara, the U.S. Attorney for the Southern District, who has made insider trading a priority for his office, said after the sentencing that “the desire to win at any cost, including breaking the law, has a steep price that Chip Skowron will now pay.”
Skowron admitted that he avoided $30 million in losses by trading on data leaked by a consultant for an expert network about the results of a clinical drug trial (see Main Justice’s earlier report).
Skowron admitted using insider information from Dr. Yves Benhamou, an internationally recognized expert on liver diseases, to avoid some $30 million in trading losses. Benhamou, who leaked advance word to Skowron about problems with a hepatitis-treatment drug that had arisen during clinical trials, pleaded guilty last April to conspiracy and lying to the SEC and cooperated with investigators in the hope of leniency. He is to be sentenced next month.
Skowron must also pay about $8 million in fines and forfeiture costs, The Times said. It is not clear how much money he will have left after his legal problems are over. The government estimated that Skowron will have a net worth of $15 million or more even after paying his penalties, but he faces numerous civil claims in connection with his wrongdoing. (FrontPoint Partners, which was not accused of wrongdoing, has shut down.)
An oddity in the case, The Times noted, is that one of the victims of Skowron’s illicit dealings was Galleon Group LLC, the hedge fund once controlled by Raj Rajaratnam, who is himself on his way to prison for 11 years for insider trading. According to papers filed in court, Galleon lost about $1.5 million when it bought stock in the company producing the hepatitis-treatment drug before the negative news became public.
