Insider Passed Tips so Friend Could ‘Make a Killing,’ U.S. Says

(Bloomberg) -- There are no emails or phone recordings that directly incriminate a man with passing secret information from his corporate-director dad to a Greek businessman, but U.S. prosecutors say there’s enough evidence for a jury to convict him.

Telemaque Lavidas, 39, is charged with passing market-moving secrets to his friend, restaurateur Georgios Nikas, who’s allegedly at the center of a three-continent insider-trading ring. Lavidas got the information from his father, Athanase, a former board member of Ariad Pharmaceuticals Inc., according to prosecutors.

“The defendant’s father had secret corporate information,” Assistant U.S. Attorney Richard Cooper told jurors in his closing argument Monday. Lavidas “used that information to tip his best friend, George Nikas so Nikas could make a killing in the stock market.”

In contrast to trials of some others accused of insider trading, including that of former Galleon Group LLC hedge fund manager Raj Rajaratnam, where prosecutors relied on wiretaps and emails, there was no such evidence directly showing Lavidas passed information to Nikas. Instead prosecutors, in their closing arguments, relied on timelines showing calls between Lavidas and his father, followed by communications with Nikas, then Nikas trading Ariad stock.

“What do you think they were talking about?” Cooper asked the jury numerous times about the calls, arguing that they were discussing Ariad.

Lavidas’s lawyer Eric Sussman argued the government’s case is based on an unsupported assumption that the two were breaking the law in those conversations.

“How would you know?” he asked members of the jury. “How would anyone know?”

Lavidas “was not one of Nikas’s many sources of confidential information,” Sussman said. “The government has not showed you a connection between Telemaque and Nikas’s trading.”

Jurors are set to begin deliberations on Tuesday.

The weeklong trial included evidence of a far-flung conspiracy beyond the allegations against Lavidas. Jurors heard testimony about communications on burner phones, a safe full of cash for paying off corrupt insiders and tens of millions of dollars in profit from illicit trading in the U.S., Europe, Israel and beyond.

The government claims Lavidas was motivated to share tips by his friendship with Nikas and a $500,000 investment Nikas’s wife made in his nutrition-bar startup Mediterra Inc. Nikas, owner of GRK Fresh Greek, is charged with insider trading. Prosecutors say he’s in Greece, a fugitive from U.S. justice. A lawyer for Nikas declined to comment on the charges.

Athanase Lavidas, the chief executive officer of the family-owned drug company Lavipharm S.A., isn’t charged.

The government’s star witness was Marc Demane Debih, a Swiss trader who was arrested in 2018 in Serbia and extradited to the U.S.

Birthday Party

Demane Debih testified that he met Lavidas once, at a birthday party set up by Nikas in 2011. He said Nikas told him Lavidas was giving him inside information that he got from his father.

Demane Debih, who pleaded guilty to dozens of criminal charges, is cooperating with the government, hoping to get a reduced sentence. Lawyers for both sides told jurors Demane Debih faces a maximum of 750 years in prison, though any sentence would likely be far less.

Sussman told jurors that Demane Debih is lying to minimize the time he’ll spend behind bars.

Nikas had other sources for Ariad information including Darina Windsor, a former Centerview Partners investment banker, and Lavidas never passed on secret information, Sussman argued in his closing statement -- a claim Cooper dismissed as “ridiculous.” Windsor is also charged and believed to be in her native Thailand.

Lavidas passed information on three pieces of corporate news that Nikas used to trade on, making $4.7 million in the process, according to prosecutors. He’s charged with telling Nikas about an impending decision to remove Ariad’s leukemia drug Iclusig from the market due to safety concerns. The company’s co-founder and former CEO, Harvey Berger, testified that the news was “a potential company-killer,” sending Ariad shares down 67% when it was announced.

Prosecutors say Lavidas again tipped Nikas weeks later when the U.S. Food and Drug Administration agreed to let Iclusig back on the market. And Lavidas tipped Nikas to an unsolicited bid by Baxalta Inc. to buy Ariad, according to the government.

Since 2013, the government has been investigating an insider-trading network thought to involve residents of the U.S., U.K., France, Switzerland, Israel, Cyprus, Greece and Hong Kong, using information from investment bankers and corporate insiders to trade ahead of pharmaceutical company moves.

Lavidas sat silently at the defense table after telling the judge he’d decided not to testify in his own defense. He’s been jailed since his arrest. In court appearances before the trial, Lavidas could be seen exchanging affectionate looks and gestures with his pregnant wife. The couple has one young child.

If convicted, Lavidas faces as long as eight years in prison, under sentencing guidelines, which are advisory and not binding on the judge, prosecutors said.

©2020 Bloomberg L.P.

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