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Tag: U.S. Department of Health and Human Services

  • URGENT >> BULLETIN >> MOVING: FDA Chemist Cheng Yi Liang Pleads Guilty In Insider Trading Case; ‘Shocking Abuse Of Trust,’ Feds Say Of Schemer’s Plot To Use Database To Harvest Illegal Profits

    >> BULLETIN >> MOVING: Cheng Yi Liang, the FDA chemist accused in March of mining the agency’s database for drug approvals or denials and using the information to make insider trades, has pleaded guilty to securities fraud and failing to disclose illicit profits.

    Liang, 57, of Gaithersburg, Md., faces a maximum term of 25 years in federal prison. Sentencing is scheduled for Jan. 9. The case was one that embarrassed the FDA and its employees, but one that exposed the corruption of a federal worker who used the tools of government to line his own pockets.

    The SEC simultaneously charged Liang civilly in March, opening up a second litigation front.

    As part of a plea agreement in the Feds’ criminal case, Liang will forfeit $3.7 million, a home and condominium in Maryland and funds  in 10 bank or investment accounts, federal prosecutors said.

    The FDA is a branch of the U.S. Department of Health and Human Services (HHS).

    “Profiting based on sensitive, insider information is not only illegal, but taints the image of thousands of hard-working government employees,” said Elton Malone,  special agent in charge of the HHS-Office of Inspector General Special Investigations Branch.  “We will continue to insist that federal government employee conduct be held to the highest of standards.”

    “Mr. Liang used inside information about pharmaceutical companies — information he had access to solely because of his position at the FDA — to pocket millions in illicit profits,” said Assistant Attorney General Lanny Breuer. “In a shocking abuse of trust, Mr. Liang exploited his position as a chemist in the FDA’s Office of New Drug Quality Assessment to cash in, using the accounts of relatives and acquaintances to hide his illegal trading.  Now, like many others on Wall Street and elsewhere, he is facing the significant consequences of trading stocks on inside information.”

    Breuer is head of the Justice Department’s Criminal Division.

    While employed at FDA, Liang “was required to file a Confidential Financial Disclosure form disclosing, among other things, investment assets with a value greater than $1,000 and sources of income greater than $200.,” investigators said. “During the time period of his insider trading scheme, Liang annually filed these forms and failed to disclose using the controlled accounts or his income from the illicit securities trading.”

    The FBI participated in the criminal probe.

    “Those who use privileged and valuable information for personal gain, break the trust placed in them as a government employee and the integrity of the research they conduct on behalf of the U.S. government,” said James W. McJunkin, assistant director in charge of the agency’s Washington Field Office.

  • FDA Chemist Cheng Yi Liang’s Very Bad Day: Busted By The Feds, Sued By The SEC For Trading On Information Lifted From Confidential Government Database

    A chemist who works for the U.S. Food and Drug Administration has been charged criminally by federal prosecutors, arrested by federal agents in Maryland, sued by the SEC — and will go to bed tonight knowing his son has been arrested in the same case.

    Cheng Yi Liang, 56, of Gaithersburg, was accused of abusing his position of trust at the FDA by mining the agency’s database for information on drug approvals or denials — and then trading on the information he gleaned to “generate more than $3.6 million in illicit profits and avoided losses,” the SEC said.

    Liang’s son, Andrew Liang, 25, also of Gaithersburg, was arrested, too.

    And high-ranking public officials minced no words when announcing the charges against the men, which included a stunning allegation that the senior Liang sought to conceal the scheme in part by trading in the account of his elderly mother in China.

    “Cheng Yi Liang was entrusted with privileged information to perform his job of ensuring the health and safety of his fellow citizens,” said Assistant U.S. Attorney General Lanny Breuer. “According to the [criminal] complaint, he and his son repeatedly violated that trust to line their own pockets.”

    Breuer is the head of the Justice Department’s Criminal Division.

    “Liang victimized both the investors who were disadvantaged by his theft of inside information and the American citizens whose trust he violated by placing private gain above public good,” said Robert Khuzami.

    Khuzami is director of the SEC’s Division of Enforcement.

    Another high-ranking official summarized today’s events by saying Liang’s actions made government workers look bad.

    “Profiting based on sensitive, insider information — as Liang is charged with today — is not only illegal, but taints the image of thousands of hard-working government employees,” sighed Elton Malone, special agent in charge of the office of special investigations for the U.S. Department of Health and Human Services, Office of the Inspector General.

    Liang, an FDA employee since 1996, began snatching information as early as July 2006, the SEC charged.

    He “illegally traded in advance of at least 27 public announcements about FDA drug approval decisions involving 19 publicly traded companies,” the agency charged.

    In a bid to cover his tracks, Liang “traded in seven brokerage accounts, none of which were in his name. One belonged to his 84-year-old mother who lives in China,” the SEC charged.

    “The insider trading laws apply to employees of the federal government just as they do to Wall Street traders, corporate insiders, or hedge fund executives,” said Daniel M. Hawke, chief of the SEC’s Market Abuse Unit.

    Father and son were charged with conspiracy to commit securities fraud and wire fraud, securities fraud and wire fraud. Federal prosecutors said investigators caught Liang after special software was installed on the work computer he was using.

    See this SEC exhibit that outlines the trades.