U.S. Markets closed

Global Insider-Trading Probe Lands Conviction of U.S. Leaker

Bob Van Voris

(Bloomberg) -- The son of a pharmaceutical-company director was convicted of leaking company secrets to a close friend who prosecutors say was part of a global insider-trading network.

Telemaque Lavidas, 39, was the first U.S. defendant tried in connection with an insider scheme that generated tens of millions of dollars on illegal tips about drug companies from investment bankers and corporate insiders. Though Lavidas played a small role in the plot, his trial in New York shed light on how a corrupt Swiss trader and others exploited contacts on three continents for market-moving information.

Lavidas was found guilty Wednesday on all seven charges, including wire fraud, securities fraud and conspiracy, after leaking information about Ariad Pharmaceuticals Inc. that he got from his father, who sat on the board. The jury found Lavidas tipped off Georgios Nikas, a Greek businessman with property and restaurants in New York. Nikas used the secrets to make $4.7 million in trading profits, according to the government.

Lavidas got less in return, prosecutors said. He passed the tips out of friendship with Nikas and in exchange for a $500,000 investment by Nikas’s wife in his startup nutrition-bar business, Mediterra Inc., they said.

U.S. District Judge Denise Cote said she’ll sentence Lavidas on April 17. He faces as long as eight years in prison. The judge refused a request by Lavidas to be sentenced before the end of February.

Lavidas has been confined since his October arrest in Manhattan’s Metropolitan Correctional Center, after Cote denied his proposed $26 million bail package before the trial. Lavidas would likely serve his sentence in a less restrictive prison than the MCC, the federal lockup where accused sex trafficker Jeffrey Epstein hanged himself in August while awaiting trial.

“It is a difficult place for a person like him to be,” Lavidas’s lawyer, Jonathan Streeter, told the judge.

Star Witness

Family members wept in court on Wednesday as Lavidas removed his suit jacket, belt and tie in preparation to be moved back to the MCC.

The jury deliberated for less than a day at the end of a one-week trial. The government’s star witness against Lavidas was a former Swiss trader, Marc Demane Debih, who said he participated in the network and made about $70 million on insider trades.

Demane Debih pleaded guilty to 38 counts and agreed to cooperate with prosecutors in hopes of leniency when he’s sentenced. He also agreed to forfeit $49 million in illegal profit. A former Goldman Sachs Group Inc. banker, Bryan Cohen, accused of leaking tips to Demane Debih, pleaded guilty to conspiracy on Jan. 7, a day after the Lavidas trial began.

The Swiss trader testified that he got profitable tips about Ariad from Nikas, who said he had access to the company’s board through Lavidas and his father, Athanase Lavidas, who isn’t charged. The elder Lavidas, who is no longer on the Ariad board, is the chief executive officer of Lavipharm SA, a family-owned drug company based in Greece. Demane Debih said he met Telemaque Lavidas once, in 2011, and never witnessed him passing confidential information.

Read More: The Motley Crew Accused of Insider Trading

The evidence against Lavidas was mostly circumstantial, with prosecutors focusing on a timeline that showed when market-moving news was provided to Ariad’s board, when Lavidas called his father and Nikas and when Nikas made big, profitable bets on Ariad stock. Nikas is in Greece and considered a fugitive by the U.S.

Defense lawyers argued that the Ariad tips came to Nikas from from an investment banker at Centerview Partners who was part of the ring, and that Lavidas never passed any company secrets.

Demane Debih, who has been in custody since his arrest in Serbia in 2018, testified that he had a safe filled with cash in his apartment and paid $12 million to a French art collector, John Dodelande, for tips he got from investment banker sources.

Dodelande, who isn’t charged, got information from investment bankers including Darina Windsor, the former Centerview banker, and Benjamin Taylor, who worked at Moelis & Co., according to prosecutors. Windsor and Taylor, who shared a London apartment, face criminal charges but are not in U.S. custody. Windsor had access to information about Ariad through her work at Centerview, the defense team said.

Evidence showed that Taylor and Windsor sometimes communicated in code, using the pet names “Pops” and “Popsy” in emails. They’re charged with providing inside information on 22 companies.

The case is U.S. v. Lavidas, 19-cr-716, U.S. District Court, Southern District of New York (Manhattan).

(Updates with reaction to verdict.)

To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Steve Stroth

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.