March 30, 2020

First Circuit affirms insider trading conviction of pharmaceutical executive’s spouse

On March 25, 2020, the insider trading conviction of Harold Altvater was affirmed by the Court of Appeals for the First Circuit.  On October 9, 2018, Altvater had been convicted by a jury in the United States District Court for the District of Massachusetts, of three counts of securities fraud for insider trading in violation of 15 USC §§ 78j(b) and 78ff(a) and 17 CFR § 240.10b-5, and sentenced to eighteen months in prison.

According to the evidence, on three separate occasions Altvater traded on confidential information obtained from his former wife, who served as head of pharmacovigilance and risk management at Ariad Pharmaceuticals, Inc. during the relevant period.  At the time, in September or October of 2013, as adduced at trial, Altvater’s wife warned him to stop trading in Ariad stock in light of the blackout period imposed by the company on all persons subject to its insider trading policy, due to progress in the regulatory approval process for a new drug being developed by Ariad.  Altvater and his then-wife were both subject to Ariad’s insider trading policy because of the wife’s position in the company, as noted by the court. 

Altvater appealed his conviction on three grounds, arguing first that admission of a redacted transcript of the deposition he had given to the US Securities and Exchange Commission in July 2016 violated Rule 106 of the Federal Rules of Evidence as an incomplete record.  The First Circuit rejected this objection because Altvater did not meet the burden of showing that the redactions created a misunderstanding or distortion that could only be averted by the introduction of the full text of the deposition.  Altvater’s second ground for appeal centered on limitations imposed on a certain line of questioning of an adverse witness, but the court rejected both his Sixth Amendment and Rule 106 challenges.   Finally, the appellant objected to the admission of testimony by his ex-wife that he considered prejudicial, but the court concluded that there was strong enough evidence of criminal conduct on all three counts that the testimony was harmless, even if wrongly admitted in light of Rule 403 of the Federal Rules of Civil Procedure.

The court thus affirmed Altvater’s conviction on all three counts.

Appeal and Affirmation