BOSTON — French physician Yves Benhamou has been arrested and charged with securities fraud after allegedly providing a hedge fund with information about adverse events in a drug trial for which he was an adviser.
The information about the investigational hepatitis C drug Albuferon allowed FrontPoint Partners to avoid losses of $30 million, according to the U.S. Attorney’s office in Manhattan.
Benhamou, of Groupe Hospitalier Pitie Salpetriere in Paris, was attending the American Association for the Study of Liver Diseases meeting here when he was arrested on Monday by FBI agents. The agency would not comment about the exact location of the arrest.
The conference took place at the Hynes Convention Center.
A spokesperson for the U.S. Attorney for the Southern District of New York told MedPage Today that Benhamou appeared before a judge in Boston federal court on Tuesday afternoon, where he consented to detention with the right to contest.
He is being transported to New York for arraignment.
In the complaint, Benhamou is charged with one count of conspiracy to commit securities fraud and one count of securities fraud. The conspiracy charge carries a maximum sentence of five years in prison and the fraud charge carries a maximum of 20 years.
Benhamou allegedly conspired with a portfolio manager for FrontPoint Partners — formerly a Morgan Stanley company — whom several reports have identified as Chip Skowron, MD, PhD, a board member of AmeriCares, the nonprofit humanitarian aid organization.
In exchange for a “stream of payments,” Benhamou allegedly supplied information about a fatality and a case of lung disease that occurred in Albuferon trials being conducted by drugmaker Human Genome Sciences of Rockville, Md.
FrontPoint Partners then allegedly sold more than six million shares of Human Genome Sciences before the disclosure about the adverse events was made public.
The complaint charges that Benhamou also consulted with other hedge funds and investors who purchased and sold securities in the healthcare sector, and the U.S. Attorney’s office told MedPage Today that the investigation is ongoing.
At the AASLD meeting, Benhamou presented research on several drugs being developed by a number of companies, including Boehringer Ingelheim and Tibotec.
Several of the co-authors on those presentations did not return requests for comment, nor did the pharmaceutical companies.
A spokesperson for Human Genome Sciences told MedPage Today that the company is fully cooperating with the investigation, and that Benhamou is no longer a consultant for the company.
In a statement, Manhattan U.S. Attorney Preet Bharara said Benhamou allegedly “abused his position as a medical doctor.”
“By profiting from his sensitive position and providing the hedge fund an unfair advantage,” he added, “Benhamou undermined the integrity of the securities market and sold out his employer.”