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

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Kaplan V. S.A.C. Capital Advisors, L.P. 12-CV-09350-Joint Consolidated Case 1:12-cv-09350-VM-KNF Document 127 Filed 03/31/14 Page 1 of 185 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 AMENDED CLASS ACTION COMPLAINT Case 1:12-cv-09350-VM-KNF Document 127 Filed 03/31/14 Page 2 of 185 (. 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 LLP David P. Abel 600 Third Avenue, 20th Floor MOTLEY RICE LLC New York, New York 10016 28 Bridgeside Boulevard Telephone: (212) 661-1100 Mt. Pleasant, South Carolina 29464 Telephone: (843) 216-9000 Co-Lead Counsel for the Kaplan Plaintiffs and the Elan Investor Class Co-Lead Counsel for the Birmingham Plaintiffs and the Wyeth Investor Class Case 1:12-cv-09350-VM-KNF Document 127 Filed 03/31/14 Page 3 of 185 TABLE OF CONTENTS INDEX OF PERSONS AND DEFINED TERMS ........................................................................ vi INTRODUCTION...........................................................................................................................1 JURISDICTIONAND VENUE ....................................................................................................11 PARTIES.......................................................................................................................................12 A. The Kaplan Plaintiffs ...................................................................................................12 B. The Birmingham Plaintiffs ...........................................................................................13 C. Defendants ...................................................................................................................13 SUBSTANTIVE ALLEGATIONS ...............................................................................................16 I. BACKGROUND REGARDING SAC AND COHEN .........................................................16 A. Cohen, SAC and Their Reliance on “Edge” ................................................................16 B. SAC’s Organizational Structure Served to Encourage Employees to Obtain Illegal Inside Information and Funnel It to Cohen ...........................................19 C. CR Intrinsic, the SAC Unit that Employed Martoma, Was Directly Supervised by Cohen and Managed Much of His Personal Wealth ............................20 II. DEFENDANTS’ INSIDER TRADING IN ELAN AND WYETH .....................................22 A. Background Regarding Elan and Wyeth ......................................................................22 B. The Bapineuzumab Phase 2 Clinical Trial and Its Role as a Key Share Price Driver for Elan and Wyeth During the Class Periods .........................................23 1. Background Regarding Bapineuzumab and the Phase 2 Clinical Trial ..............23 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 ................................24 3. The Phase 2 Trial Was a Major Source of Wyeth Price Gains During the Period That SAC Was Buying on Illegal Inside Information .......................30 C. Background Regarding Martoma and Gilman .............................................................35 1. Martoma Was Hired to Work on Cohen’s Investment Team Based on His Contacts at Public Companies, and His Access to Inside Information Was Later Noted by Cohen .............................................................35 2. Gilman and His Role in the Bapineuzumab Clinical Trials ................................36 Case 1:12-cv-09350-VM-KNF Document 127 Filed 03/31/14 Page 4 of 185 D. Martoma Pursues Contacts with Numerous Bapineuzumab Phase 2 Clinical Investigators and Recruits Gilman and at Least One Other Doctor Participating in the Phase 2 Trial .................................................................................39 E. Gilman Provides Martoma with Inside Information Regarding the Bapineuzumab Phase 2 Trial on Numerous Occasions Between August 2006 and July 2008 ......................................................................................................40 F. Martoma Also Receives Inside Information Regarding the Bapi Phase 2 Trial from a Second Doctor, Joel Ross, Who Was a Principal Investigator in the Phase 2 Bapi Trial ..............................................................................................52 G. Cohen and Martoma Accumulate Stakes in Elan and Wyeth That Were Among SAC’s Largest Positions in Any Stock While Receiving Inside Information Regarding the Bapineuzumab Phase 2 Trial from Gilman and Ross..............................................................................................................................57 H. Martoma Supplies Cohen Overtly Inside Information Regarding the Bapineuzumab Phase 2 Trial, Including Detailed Information Concerning the Trial Results that Had Not Been Publicly Disclosed .............................................60 I. In the Months Before ICAD, Cohen Closely Analyzes the Prospects for the Bapineuzumab Phase 2 Trial After Two CR Intrinsic Fund Managers Urgently Warn of a Negative Outcome .......................................................................62 J. Cohen Sides with Martoma, Citing His “Good Relationships in this Arena” and Does Not Respond to the Managers’ Repeated Urging that Martoma Disclose the Source of His “Edge” ..............................................................66 K. In Contrast with His Detailed Written Analyses of Other Issues, Martoma Provided Cohen No Written Analysis to Support His “High Conviction” of Positive Phase 2 Trial Results, Instead Updating Cohen Periodically by Phone............................................................................................................................74 L. Cohen Receives and Responds to Emails Explicitly Discussing Negative Inside Information Regarding the Bapineuzumab Phase 2 Trials from Other CR Intrinsic Fund Managers, But Continues to Side with Martoma .................78 M. Cohen Does Not Object to Martoma’s Efforts to Elicit Information Concerning the Bapineuzumab Phase 2 Trial from Elan’s CEO at a Private Dinner Meeting Days Before the Phase 2 Trial Results Were to Be Released.......................................................................................................................80 N. Cohen and Martoma Remain Bullish on Elan and Wyeth Following the June 17 “Top Line” Announcement – the Final Public Disclosure Regarding Bapineuzumab Before ICAD .....................................................................81 O. Gilman Supplies Martoma the Phase 2 Trial Results ..................................................82 - ii - Case 1:12-cv-09350-VM-KNF Document 127 Filed 03/31/14 Page 5 of 185 P Martoma Reports His Pessimism About the Phase 2 Trial Results to Cohen, and They Then Liquidate SAC’s Positions in Elan and Wyeth and Massively Short Both Stocks in the Seven Trading Days Before ICAD .....................85 Q. Cohen Actively Supervises the Elan and Wyeth Sales, and Takes Extraordinary Measures to Conceal Them, Even from Other SAC Personnel......................................................................................................................90 R. Elan and Gilman Disclose the Mixed and Disappointing
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