2nd UPDATE: Bristol-Myers Executive Charged With Insider Trading

--Bristol executive allegedly traded options in drug maker's acquisition targets

--Executive allegedly made more than $300,000 in profits from trading

--Bristol places executive on leave immediately

(Adds details about executive's court appearance beginning in 6th paragraph; details about option trades in 18th graph.)

 
   By Peter Loftus 
 

Federal authorities arrested a Bristol-Myers Squibb Co. (BMY) executive Thursday on charges he used confidential information about the drug maker's acquisition targets to make more than $300,000 in illicit profits from stock-option trading.

The U.S. Attorney's Office in New Jersey charged Robert Ramnarine, the drug maker's assistant treasurer for capital markets, with three counts of insider-trading securities fraud. The Securities and Exchange Commission filed parallel civil charges against Mr. Ramnarine.

Bristol-Myers issued a statement Thursday saying Mr. Ramnarine has been placed on administrative leave effective immediately. "Bristol-Myers Squibb has clear and strict policies prohibiting trading on material non-public information and is cooperating with the government's investigation," the company said.

The 45-year-old Mr. Ramnarine, of East Brunswick, N.J., is accused of purchasing options in three companies that Bristol was targeting: ZymoGenetics Inc., Pharmasset Inc. and Amylin Pharmaceuticals Inc. (AMLN). Bristol-Myers purchased ZymoGenetics for $829 million in 2010 and agreed in June to acquire Amylin for $5.3 billion. Gilead Sciences Inc. (GILD) bought Pharmasset for $11 billion earlier this year.

The criminal complaint filed against Mr. Ramnarine in U.S. District Court in New Jersey also accused the defendant of lying about which drug company he worked for and doing online searches about insider trading in the options market.

FBI agents arrested Mr. Ramnarine Thursday morning. He was released on bail after an initial appearance in federal court in Newark, N.J., Thursday afternoon. At the hearing, Mr. Ramnarine was advised of his rights and assigned an assistant public defender to represent him, according to court documents.

Neither Mr. Ramnarine nor his attorney could be reached for comment.

Mr. Ramnarine served as director and executive director of pensions and savings investments at Bristol-Myers from 2008 until July 2012, when he was named assistant treasurer of capital markets, according to the complaint.

The executive was involved in evaluating potential Bristol-Myers acquisition targets in those roles, the complaint said, and had a duty not to use material, nonpublic information for his personal benefit.

According to the complaint, Bristol-Myers began negotiating with ZymoGenetics about a deal in May 2010, and announced an agreement in September 2010. Before the public announcement, Mr. Ramnarine purchased ZymoGenetics call options, which he sold after the announcement for a profit of $30,551, according to the complaint.

Bristol-Myers also explored a potential acquisition of Pharmasset in October and November of 2011 before withdrawing from discussions, which cleared the way for Gilead's acquisition, according to the complaint.

Before the November announcement of the Gilead purchase of Pharmasset, Mr. Ramnarine purchased Pharmasset call options that eventually netted him about $225,026 in illicit profits, the complaint said.

According to the complaint, Bristol-Myers made a preliminary offer to acquire Amylin for $25 to $27 per share in May, ultimately agreeing to pay $31 per share in June. Before the public announcement, Mr. Ramnarine purchased Amylin options that resulted in profits of $55,784, according to the complaint.

Federal authorities also alleged Mr. Ramnarine took steps aimed at trying to conceal his conduct. In early November 2011, before he purchased Pharmasset options, Mr. Ramnarine conducted Internet searches on a Yahoo site from his Princeton, N.J., office related to avoiding detection of insider trading, according to court documents.

The search terms included: "can option be traced to purchaser" and "can stock option be traced to purchase inside trading," according to the complaint. Prosecutors said Mr. Ramnarine also viewed a 2005 press release about SEC allegations of insider trading surrounding Reebok shares.

The complaint said in 2010, Mr. Ramnarine falsely stated he worked for Merck & Co. (MRK) in an application to trade options in a Scottrade account, which he used to purchase some of the ZymoGenetics options.

"Ramnarine tried to educate himself about how the SEC investigates insider trading so he could avoid detection, but apparently he ignored countless successful SEC enforcement actions against similarly ill-motivated individuals who paid a heavy price for their illegal trading," Daniel M. Hawke, chief of the SEC Enforcement Division's Market Abuse Unit, said in a press release.

In the case of Amylin, Mr. Ramnarine turned to the option market to make bets that would benefit from Amylin shares climbing higher.

In May and June, Mr. Ramnarine sold "put" options, which granted buyers the right to sell Amylin shares to him at a set price, and he purchased "call" options, which gave him the right to buy Amylin shares at a set price.

At the time he started trading in Amylin options in late May, Amylin shares were trading around $25.80. He began to sell put options and, as the final deal got closer to getting announced in late June, he purchased call options. Both moves profited as Amylin shares rose about 19% from late May until July 2.

By the time that Bristol-Myers agreed to acquire Amylin for $31 per share cash, in a deal announced June 30, Mr. Ramnarine had closed some of his option positions. He closed the remaining positions on the first trading day after the deal was announced, when Amylin shares climbed to $30.71.

In all, the sale of 710 put options and purchase of 130 call options net Mr. Ramnarine $55,784 over the course five weeks.

Each of the three counts of criminal securities fraud carries a maximum potential penalty of 20 years in prison and a fine of $5 million, according to the U.S. Attorney's Office in New Jersey.

The SEC is seeking a court order to freeze Mr. Ramnarine's brokerage account assets, among other sanctions.

--Kaitlyn Kiernan contributed to this article.

Write to Peter Loftus at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires