The Joplin Globe, Joplin, MO

Business

April 27, 2012

Insider trading inquiry focuses on medical devices deal, source says

LOS ANGELES — Prosecutors probing insider trading in the medical devices industry are investigating a senior Goldman Sachs banker and a former employee of the notorious hedge fund Galleon Group.

The investigation, according to a person briefed on the matter, is focused on the 2009 takeover of Advanced Medical Optics in Santa Ana, Calif.

The U.S. attorney’s office in Los Angeles has been scrutinizing the ties between Goldman managing partner Matthew Korenberg, who worked on the Advanced Medical Optics deal, and Paul Yook, a former portfolio manager at Galleon, the person said.

Korenberg’s attorney, John Hueston of Irell & Manella, said the San Francisco-based banker had done nothing wrong. Yook couldn’t be reached for comment.

Galleon’s head, Raj Rajaratnam, was convicted in a high-profile New York trial last year of 14 counts of conspiracy and securities fraud. The government said that he had made more than $50 million in illicit profits by trading on inside information. He was sentenced to 11 years in prison.

The disclosure that a senior Goldman banker was under investigation was made last week in a New York court by a lawyer for Rajat K. Gupta, the highest-ranking corporate figure implicated in the government’s long-running crackdown on insider trading. That banker was not named at the proceeding.

Gupta, a former Goldman director, is accused of leaking inside information to Rajaratnam. His attorney, Gary P. Naftalis, has said the inside information could have been leaked by someone at Goldman other than Gupta, who has pleaded not guilty.

Naftalis couldn’t be reached for comment.

Hueston, a former Los Angeles federal prosecutor who took a lead role in the Enron fraud cases, said a 2  1/2-year investigation of Korenberg by criminal prosecutors and the Securities and Exchange Commission “has gone nowhere and found nothing wrong.” A Goldman investigation also found no improprieties, Hueston added.

“There is simply no relation between Mr. Korenberg and Rajaratnam, Mr. Korenberg and Gupta,” Hueston said. “He has no connection to that case.”

Hueston declined to discuss Korenberg’s relationship with Yook.

The investigation of Abbott Laboratories’ takeover of Advanced Medical Optics is part of a broader inquiry of mergers and acquisitions in the medical devices industry, according to the person briefed on the matter, who was not authorized to discuss the case publicly and spoke on condition of anonymity.

The Advanced Medical Optics case already has produced one notable insider trading settlement. Former professional baseball player Doug DeCinces agreed in August to pay $2.5 million to settle SEC civil allegations that he acted on an illegal tip to score big profits trading the stock. DeCinces did not admit or deny the accusations.

 

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