EX-FDA CHEMIST, CHENG YI LIANG, SENTENCED TO 5 YEARS IN U.S. FEDERAL PRISON FOR INSIDER TRADING CASE
BY PETER LATTMAN
A federal judge sentenced a longtime chemist with the Food and Drug Administration to five years in prison for using confidential information about drug applications pending with the agency to make nearly $4 million in illegal trading profits.
Cheng Yi Liang, the chemist, was sentenced by Judge Deborah Chasanow on Monday in federal court in Maryland after he had pleaded guilty last year to insider trading crimes. Federal authorities arrested him and his son, Andrew Liang, last March.
"Taking advantage of his special access as a chemist at the F.D.A., Mr. Liang used sensitive inside information to reap illegal profits in the pharmaceutical securities market," said Lanny A. Breuer, an assistant attorney general, in a statement. "For years, he exploited his position in the agency to make easy money on the stock market. But today's sentence shows that easy money has consequences. Investors engage in insider trading at their peril."
The case brought against Mr. Laing was a rare prosecution of an official from the F.D.A., an agency that handles a large amount of market-moving information. The agency has a rigorous ethics code and imposes significant trading restrictions on its employees.
The five-year sentence was at the low-end of the 57-to-71-month range suggested by the nonbinding federal sentencing guidelines.
Mr. Liang used the F.D.A.'s internal databases to gather information about upcoming agency announcements and then would buy stock of companies that he knew were due for positive news from F.D.A. report or would sell short companies he knew were going to receive negative news. He would then close out his positions after the F.D.A. released its verdict on drug applications.
For instance, Mr. Liang traded in advance of a May 2009 announcement by Vanda Pharmaceuticals that the F.D.A. had approved its drug Fanapt. Using several brokerage accounts, Mr. Liang and his son reaped more than $1 million in profits for a nearly 800 percent profit.
Mr. Liang, 58, agreed to forfeit more than $3.7 million in illegal profits, including his home in Gaithersburg, Md. His son, Andrew Liang, had previously pleaded guilty and was sentenced to a year in prison. The younger Mr. Liang was also charged with possession of child pornography and had to register as a sex offender.
Separately, Mr. Breuer, the assistant attorney general of the Justice Department's criminal division, is receiving an award on Monday night at the 37th annual dinner of the Hogan-Morgenthau Associates, which is a group of alumni who served in the New York district attorney's office under the two former district attorneys, Frank Hogan and Robert Mortgenthau. He and Ron Reich, the assistant attorney general for the office of legislative affairs, are joint recipients of the award.