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  • Dan Curto

Interim Analysis: Former Immunomedic CFO arrested; WOW-jail time for OIG exclusion violation

  • Former Immunomedic CFO Arrested For Insider Trading


The US Attorney's Office for the District of New Jersey arrested Usama Malik, the former CFO of Immunomedic and Lauren Wood, the former head of Corporate Communications of Immunomedic, for insider trading. As you may recall, Immunomedic was acquired by Gilead in October 2020 for $21 billion.


According to the Criminal Complaint filed, the government alleges that Malik was one of only three people (Malik, the CEO and the Chief Medical Officer of Immunomedic) that learned on April 2, 2020 that the company's breast cancer drug "had proven effective in pre-market clinical trials" and that the FDA did not object to Immunomedic stopping its clinical trial early and seeking FDA approval. The complaint alleges that almost immediately after getting this information, Malik called Wood, who he lived with, and told her the news. Wood then placed an order to buy $64,4000 of Immunomedic stock that night. The information about Immunomedic's clinical trial was not made public until April 6, 2020. According to the complaint, Wood made a profit on her purchase of $213,618. The government further alleges that Malik tipped his family and they also bought stock before the news was public and made a profit from this information.


What is interesting about a case like this is if the allegations are true it is nearly impossible for a company to stop a rogue insider from tipping a third-party who then trades on the public markets. As a general matter, a best practice for companies that have critical non-public information like this that will clearly impact the stock price is to notify the company's General Counsel at the same time as notifying other executives. The General Counsel can then immediately remind insiders of the obligation not to trade off this information or tip others. It is unclear if that happened here, although the complaint suggests it didn't since the government alleges only three people had this information early. The other question I would have is why the company waited 4 days to announce this information. Another best practice would have been to get this information out into the public as soon as possible to try to avoid these exact types of issues. I don't know the specific facts here so there may have been circumstances that made this difficult.


You can find information about Usama Malik and Lauren Wood's arrest here: https://www.justice.gov/usao-nj/pr/former-chief-financial-officer-and-former-head-corporate-communications-21-billion and https://www.justice.gov/usao-nj/press-release/file/1452836/download


  • Wow - 6.5 Years Jail Time For Pharmacist That Violated OIG Exclusion Order

Phillip Minga, an operator of pharmacies in Mississippi and Alabama, was sentenced to 78 months in prison after pleading guilty to four counts of health care fraud and one count of conspiracy to commit health care fraud. The court also ordered Minga to forfeit $7.1 million and to repay more than $16.1 million in restitution.


According to the indictment, Minga signed a written agreement in 2016 with the OIG in which he agreed to be excluded from the Medicare Program for 10 years. The exclusion agreement provided that Medicare would not pay claims submitted by anyone who employed Minga. Nevertheless, from 2016 until 2021, Minga continued to manage and control pharmacies that submitted claims for payment to Medicare. In order to avoid detection, Minga ensured that those submitting Medicare enrollment/revalidation paperwork for these pharmacies would not disclose Minga’s ownership interest or managerial role in these pharmacies. From October 17, 2016, to August 16, 2021, Medicare paid approximately $16,109,446.67 to the pharmacies in which Minga had an ownership interest or managerial role.


What is crazy about this case, is the indictment does not allege that Medicare's payments to the pharmacies were medically unnecessary or inappropriate. The only allegation is that these pharmacies submitted these claims while hiding Minga's role. So adding it up, Minga gets 6.5 years of jail and the government gets complete restitution for all of the money it paid for what could be legitimate services. Wow!!! This is a good reminder, that checking the OIG's exclusion list is a critical step whenever a drug company engages a doctor, pharmacist or other vendor.


The government's press release is here:


https://www.justice.gov/usao-ndal/pr/mississippi-resident-sentenced-78-months-prison-healthcare-fraud


Indictment can be found here:

5111402-0--109899
.pdf
Download PDF • 226KB





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