Prominent Indian American charged with insider tradingMay 26th, 2008 - 6:57 pm ICT by admin
New York, May 26 (IANS) Zachariah P. Zachariah, an influential Indian American Republican who has raised funds for the party and has been close to the Bush family, has been charged with insider trading by the Securities and Exchange Commission (SEC). In a complaint filed at the federal court in Miami, the SEC charged Florida-based cardiologist Zachariah, 58, and his brother Mammen P. Zachariah, 60, also a cardiologist, with illegal trading in the shares of two unrelated companies, local papers have reported.
The Zachariah brothers run the Fort Lauderdale Heart Institute in Fort Lauderdale.
Thiruvananthapuram-born Zachariah, former chairman of the Florida Council on Economic Education (FCEE), is accused of illegally purchasing shares worth $730,000 of Ivax Corp, a pharmaceutical firm in Fort Lauderdale, in July 2005, minutes after he learned that the company was to be acquired by Teva Pharmaceuticals despite a “blackout” period that forbid company officers and directors from trading in the stock.
He was a director of Ivax.
The SEC also said Zachariah later tipped off his brother who bought shares worth $46,000 on the last trading day before Ivax announced the deal.
Linda Chatman Thomsen, director of the SEC’s Division of Enforcement, said: “The use of inside information to trade ahead of mergers and acquisitions undermines investors’ faith in the integrity of our public markets. This action demonstrates that we will continue to vigorously pursue actions against those who engage in such misconduct.”
Calling the charges unfounded, the Zacharia brothers’ attorney Jeff Gutchess said they plan to fight the SEC in court.
He said Zachariah did not know about the pending Teva acquisition prior to buying the stock and was unaware of an Ivax policy that required directors pre-clear stock transactions in advance with the company’s general counsel.
He argued that Zachariah had been appointed to the Ivax board just three months earlier and bought the stock because he wanted to have holdings in line with those of other directors.
The Zachariah brothers are also accused of illegally buying more than $200,000 worth of shares in Correctional Services Corp in Sarasota before that company publicly announced in July 2005 that it would be purchased by the Geo Group in Boca Raton.
The brothers told a friend, Sheldon Nassberg, an endocrinologist, of the pending deal, and he too purchased stock, the SEC said.
Attorney Gutchess said Zachariah was used to buying stock in correctional firms and his brother and Nassberg sometimes relied on his stock advice.
Although the SEC said Zachariah had several connections, Gutchess said the market watchdog did not identify from whom Zachariah might have received information about the Correctional-Geo deal.
Zachariah has done a lot of public service work, has an unblemished reputation and has never been charged with any criminal activity, Gutchess said.
Zachariah was chairman of the FCEE, a statewide non-profit organisation based in Tampa that works to improve economic education and financial literacy in Florida, from 2003 to 2006. He is a co-founder of Universal Healthcare, a health maintenance organisation based in St. Petersburg.
Now, the SEC wants Zachariah to not only turn over his profits on the trades and pay civil penalties but also that he should be banned from serving as an officer or board member or director of any publicly traded company in the future.
Besides his closeness to President George W. Bush and his father, former president George Bush, Zachariah is very friendly with erstwhile Florida governor Jeb Bush, the US president’s younger brother.
As governor, Jeb Bush appointed the cardiologist as chairman of the powerful Florida Board of Medicine, and then as a member of the Florida Board of Governors that oversees the state university system.
In 2004, both Bush Senior and Jeb Bush were keynote speakers at a fundraiser for President Bush’s re-election at Zachariah’s home, which garnered over $1.5 million.
Tags: blackout period, bush family, chatman, economic education, fcee, florida council, general counsel, heart institute, insider trading, ivax corp, local papers, mergers and acquisitions, pharmaceutical firm, public markets, securities and exchange commission, stock transactions, teva pharmaceuticals, thomsen, unrelated companies, zacharia