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Kaplan V. S.A.C. Capital Advisors, L.P. 12-CV-09350

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Kaplan V. S.A.C. Capital Advisors, L.P. 12-CV-09350 Case 1:12-cv-09350-VM-KNF Document 124 Filed 01/08/14 Page 1 of 152 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - x DAVID E. KAPLAN, MICHAEL S. ALLEN, CHI-PIN HSU, GARY W. MUENSTERMAN, FRED M. ROSS, MICHAEL CAHILL, JOHN P. CONNOLLY, JOHN M. GOULD, CAROLINE P. GOULD, GREG KAPPES, DEEANN LEMMERLING, LUC No. 12 Civ. 9350 (VM) (KNF) LEMMERLING, GARRY LEONARD, DAVID : (All Actions) LINDSAY, RICHARD LLOYD, GLEN LOCHMUELLER, STEPHEN W. MAMBER, JAMES C. MCGOWAN, CHRIS MITCHEM, BRIDGET : JURY TRIAL DEMANDED MONRAD, CHRISTIAN MONRAD, BENJAMIN MONRAD, JOSEPH F. MORGAN, JIM MOSER, STEVEN R. OLSON, LAWSON PHILLIPS, : ECF CASE SEYMOND PON, PAT A. SANYE, RONALD J. SANYE, PATRICIA TRACY, LINH TU, RAJ VADDI, JOHN WOLFF, and RHONDA WOLFF, Individually and on Behalf of All Others Similarly Situated, Plaintiffs, - against - S.A.C. CAPITAL ADVISORS, L.P., S.A.C. CAPITAL ADVISORS, INC., CR INTRINSIC INVESTORS, LLC, CR INTRINSIC INVESTMENTS, LLC, S.A.C. CAPITAL ADVISORS, LLC, S.A.C. CAPITAL ASSOCIATES, LLC, S.A.C. INTERNATIONAL EQUITIES, LLC, S.A.C. SELECT FUND, LLC, STEVEN A. COHEN, MATHEW MARTOMA, and SIDNEY GILMAN, Defendants. - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - x (caption continued . ) JOINT CONSOLIDATED CLASS ACTION COMPLAINT FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER Case 1:12-cv-09350-VM-KNF Document 124 Filed 01/08/14 Page 2 of 152 (. caption continued) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x : BIRMINGHAM RETIREMENT AND RELIEF : SYSTEM and KBC ASSET MANAGEMENT NV, : Individually and on Behalf of All Others Similarly : Situated, : No. 13 Civ. 2459 (VM) (KNF) Plaintiffs, : - against - : JURY TRIAL DEMANDED : S.A.C. CAPITAL ADVISORS, L.P., S.A.C. CAPITAL : ADVISORS, INC., CR INTRINSIC INVESTORS, : ECF CASE LLC, CR INTRINSIC INVESTMENTS, LLC, S.A.C. : CAPITAL ADVISORS, LLC, S.A.C. CAPITAL : ASSOCIATES, LLC, S.A.C. INTERNATIONAL : EQUITIES, LLC, S.A.C. SELECT FUND, LLC, : STEVEN A. COHEN, MATHEW MARTOMA, and : SIDNEY GILMAN, : Defendants. - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - x Deborah Clark-Weintraub Ethan D. Wohl Joseph P. Guglielmo Krista T. Rosen Tom Laughlin Sara J. Wigmore SCOTT+SCOTT, WOHL & FRUCHTER LLP ATTORNEYS AT LAW, LLP 570 Lexington Avenue, 16th Floor The Chrysler Building New York, New York 10022 405 Lexington Avenue, 40th Floor Telephone: (212) 758-4000 New York, New York 10174 Telephone: (212) 223-6444 Marc I. Gross Tamar A. Weinrib Gregg S. Levin POMERANTZ GROSSMAN HUFFORD David P. Abel DAHLSTROM & GROSS LLP MOTLEY RICE LLC 600 Third Avenue, 20th Floor 28 Bridgeside Boulevard New York, New York 10016 Mt. Pleasant, South Carolina 29464 Telephone: (212) 661-1100 Telephone: (843) 216-9000 Co-Lead Counsel for the Kaplan Plaintiffs and Co-Lead Counsel for the Birmingham the Elan Investor Class Plaintiffs and the Wyeth Investor Class Case 1:12-cv-09350-VM-KNF Document 124 Filed 01/08/14 Page 3 of 152 TABLE OF CONTENTS INDEX OF DEFINED TERMS............................................................................................. vi INTRODUCTION................................................................................................................. .1 JURISDICTION AND VENUE. ............................................................................................ .10 PARTIES............................................................................................................................... .11 A. The Kaplan Plaintiffs........................................................................................... .11 B. The Binningham Plaintiffs................................................................................... .12 C. Defendants ........................................................................................................... .12 SUBSTANTIVE ALLEGATIONS ....................................................................................... .16 I. BACKGROUND REGARDING SAC AND COHEN................................................. .16 A. Cohen, SAC and Their Reliance on 'Edge"........................................................ .16 B. 1 .....................................................................18 C. CR Intrinsic, the SAC Unit that Employed Martoma, Was Directly Supervised by Cohen and Managed Much of His Personal Wealth.................... .19 II. DEFENDANTS' INSIDER TRADING IN ELAN AND WYETH............................. .20 A. Background Regarding Elan and Wyeth.............................................................. .20 B. The Bapiueiizumab Phase 2 Clinical Trial and Its Role as a Key Share Price Driver for Elan and Wyeth During the Class Periods................................. .21 1. Background Regarding Bapineiizumab and the Phase 2 Clinical Trial...... .21 2. The Phase 2 Trial Was the Primary Source of Elan ADR Price Gains During the Period That Cohen and Martoma Were Buying Elan Securities and Receiving Inside Information from Gilman........................ .23 3. The Phase 2 Trial Was a Major Source of Wyeth Price Gains During the Period That SAC Was Buying on Illegal Inside Information............... .28 C. Background Regarding Martoma and Gilman..................................................... .33 1. Martoma Was Hired by SAC for His Contacts at Public Coinpanie 1 -'- .33 2. Gilman and His Role in the Bapineuzumab Clinical Trials........................ .34 Case 1:12-cv-09350-VM-KNF Document 124 Filed 01/08/14 Page 4 of 152 LII 37 E. Gilman Provides Martoma with Inside Information Regarding the Bapineuzumab Phase 2 Trial on Numerous Occasions Between August 2006 and July 2008......................................................................................................38 F. Cohen and Martoma Accumulate Large Positions in Elan and Wyeth While Receiving Inside Information Regarding the Bapineuzumab Phase 2 Trialfrom Gilman ........................................................................................................ 42 G. 45 I:' 47 I. 51 J ...................................................................56 K. tI] L. M. Cohen and Martoma Remain Bullish on Elan and Wyeth Following the June 17 'Top Line" Announcement - the Final Public Disclosure Regarding Bapineuzumab Before ICAD .....................................................................63 N. Gilnian Supplies Martoma the Disappointing Phase 2 Trial Results, Martoma Speaks to Cohen. and They Then Liquidate Their Positions in Elan and Wyeth and Massively Short Both Stocks iii the Seven Trading DaysBefore ICAD.......................................................................................................63 0. The Disappointing Clinical Trial Results and SAC's Resulting Long and Short Sales of Elan and Wyeth....................................................................................66 - 11 - Case 1:12-cv-09350-VM-KNF Document 124 Filed 01/08/14 Page 5 of 152 P. Cohen Actively Concealed the Elan and Wyeth Sales, Even from Other SACPersonnel .............................................................................................................69 Q. Elan and Gilman Disclose the Mixed and Disappointing Clinical Trial Results, Prompting a Sell-off of Elan ADRs and Wyeth Shares and Divergent Views of Bapineuzumab’s Potential ...........................................................72 1. The Reported Bapineuzumab Phase 2 Results Were Confusing and Ambiguous ..........................................................................................................72 2. Gilman’s Weak 13 Minute Presentation Further Contributed to MarketUncertainty .............................................................................................74 3. The Complex, Ambiguous Nature of the Publicly Disclosed Phase 2 Results Prompted Widely Divergent Analyst and Expert Assessments of Bapineuzumab’s Potential .........................................................75 R. Elan Drops Sharply Again Based on Negative Safety News Concerning Tysabri Disclosed Two Days After ICAD ...................................................................79 S. SAC’s Insider Trading Caused It to Avoid Losses Resulting from the July 31 PML Disclosure ......................................................................................................80 1. As of July 31, SAC Retained an Informational Advantage over Public Investors as a Result of Receiving the Inside Information ......................80 2. SAC’s Avoidance of Losses Following the July 31 PML Disclosure Can Be Traced with Reasonable Certainty to Its Illegal Insider Trading ................................................................................................................81 III. THE WIDESPREAD INSIDER TRADING AT SAC AND COHEN’S PERSONAL INVOLVEMENT IN IT FURTHER ESTABLISH SAC AND COHEN’S LIABILITY FOR MARTOMA’S ILLEGAL ACTS .........................................82 A. SAC and Cohen Had a Duty to Prevent Misuse of Nonpublic Information ................82 B. Since 2009, Twelve SAC Employees Have Been Charged with, Admitted, or Been Implicated as Co-Conspirators in, Insider Trading While at SAC .................83 1. Noah Freeman .....................................................................................................83 2. Donald Longueuil ...............................................................................................89 3. Jonathan Hollander .............................................................................................90
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