UNITED STATES DISTRICT COURT DISTRICT OF...

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

ALBERT BRODZINSKY AND EVELYN BRODZINSKY,

Plaintiffs,

v.

FRONTPOINT PARTNERS LLC, YVES BENHAMOU, JOSEPH F. “CHIP” SKOWRON III, FRONTPOINT HEALTHCARE FLAGSHIP FUND, L.P. f/k/a FRONTPOINT HEALTHCARE FUND, L.P., FRONTPOINT HEALTHCARE HORIZONS FUND, L.P., FRONTPOINT HEALTHCARE I FUND, L.P., FRONTPOINT HEALTHCARE FLAGSHIP ENHANCED FUND, L.P. f/k/a FRONTPOINT HEALTHCARE FUND 2X, L.P., FRONTPOINT HEALTHCARE LONG HORIZONS FUND, L.P., FRONTPOINT HEALTHCARE CENTENNIAL FUND, L.P., FRONTPOINT HEALTHCARE FLAGSHIP FUND GP, LLC f/k/a FRONTPOINT HEALTHCARE FUND GP, LLC, FRONTPOINT HEALTHCARE HORIZONS FUND GP, LLC, FRONTPOINT UNIVERSAL GP, LLC, FRONTPOINT HEALTHCARE FLAGSHIP ENHANCED FUND GP, LLC f/k/a FRONTPOINT HEALTHCARE FUND 2X GP, LLC, FRONTPOINT HEALTHCARE LONG HORIZONS FUND GP, LLC, FRONTPOINT HEALTHCARE CENTENNIAL FUND GP, LLC,

Defendants.

DOCKET NO. 3:11-cv-00010-WWE

September 19, 2011

SECOND AMENDED CLASS ACTION COMPLAINT

Case 3:11-cv-00010-WWE Document 118 Filed 09/19/11 of 51

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Plaintiffs Albert Brodzinsky and Evelyn Brodzinksy (“Plaintiffs”), based on the

investigation of their counsel, which included the review of public filings of the United States

Department of Justice (“DOJ”) and the United States Securities and Exchange Commission

(“SEC”), allege on information and belief as follows:

INTRODUCTION

1. Over a six-week period in December 2007 and January 2008, Defendant Joseph F.

“Chip” Skowron III, M.D., PhD. (“Skowron”), a former portfolio manager for six healthcare-

related hedge funds affiliated with and managed by Defendant FrontPoint Partners LLC

(“FrontPoint”), sold approximately six million shares of Human Genome Sciences, Inc.

(“HGSI”) common stock for the funds while in possession of material negative non-public

information concerning HGSI’s clinical trial for the drug Albumin Interferon Alfa 2-a

(“Albuferon”). The six healthcare-related hedge funds are Defendants FrontPoint Healthcare

Flagship Fund, L.P. f/k/a FrontPoint Healthcare Fund, L.P., FrontPoint Healthcare Horizons

Fund, L.P., FrontPoint Healthcare I Fund, L.P., FrontPoint Healthcare Flagship Enhanced Fund,

L.P. f/k/a FrontPoint Healthcare Fund 2X, L.P., FrontPoint Healthcare Long Horizons Fund,

L.P., and FrontPoint Healthcare Centennial Fund, L.P. (collectively “Hedge Fund Defendants”).

The six investment advisors to the Hedge Fund Defendants are FrontPoint Healthcare Flagship

Fund GP, LLC f/k/a FrontPoint Healthcare Fund GP, LLC, FrontPoint Healthcare Horizons Fund

GP, LLC, FrontPoint Universal GP, LLC, FrontPoint Healthcare Flagship Enhanced Fund GP,

LLC f/k/a FrontPoint Healthcare Fund 2X GP, LLC, FrontPoint Healthcare Long Horizons Fund

GP, LLC, and FrontPoint Healthcare Centennial Fund GP, LLC (collectively “Investment

Advisor Defendants”).


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2. Skowron’s material negative non-public information came from Defendant Yves

Benhamou, M.D. (“Benhamou”). Benhamou was one of five members of a steering committee

(“Steering Committee”) overseeing the Albuferon trial. At the same time, he worked for an

expert networking firm Guidepoint Global, LLC (“Guidepoint Global”) and consulted with

Skowron, the Investment Advisor Defendants and the Hedge Fund Defendants on multiple

occasions since in or about March 2006. Beginning in or about April 2007, Skowron and

Benhamou oftentimes circumvented Guidepoint Global by directly dealing with each other

independently of the firm.

3. Commencing in November 2007, and on multiple occasions prior to January 23,

2008, Benhamou learned material negative non-public information about Phase 3 of the

Albuferon trial that had negative implications for Albuferon’s future commercial potential. In

breach of his obligations to HGSI as a Steering Committee member and investigative physician

for the clinical trial, Benhamou communicated such information to Skowron, and hence to the

Investment Advisor Defendants and the Hedge Fund Defendants, for Benhamou’s own benefit,

including: (i) the receipt of financial benefits such as payments of cash and other expenses, (ii)

the development of trust and confidence with Skowron, and (iii) the development of a potential

future business relationship.

4. Skowron knew that Benhamou participated in the Albuferon trial and served on

the trial’s Steering Committee as an investigative physician. He also knew or should have

known based on his experience, as well as his employers’ policies, that Benhamou had an

obligation not to disclose confidential information about the trial. Nonetheless, immediately

upon receiving material negative non-public information from Benhamou about the Albuferon

trial, Skowron took action to sell the Hedge Fund Defendants’ holdings of HGSI common stock.


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On key dates prior to HGSI’s announcement of negative news concerning the trial, including

minutes before the close of the markets on January 22, 2008, Skowron, acting under the authority

delegated to him by FrontPoint, caused the Investment Advisor Defendants to cause the Hedge

Fund Defendants to sell all of their remaining holdings of HGSI common stock.

5. On January 23, 2008, HGSI publicly announced that all patients who had been

administered a higher dosage level of Albuferon in its clinical trial would be moved to a lower

dosage level due to a safety issue detected during Phase 3 of the trial. The higher dosage level

was believed, until then, to have greater commercial potential than the lower dosage. In response

to HGSI’s announcement, the market price of HGSI’s common stock fell by approximately 44

percent, to $5.62 a share by the close of the markets that day.

6. Overall, the six Hedge Fund Defendants sold more than six million shares of

HGSI common stock – representing all of their holdings – thereby avoiding at least $30 million

in losses. After HGSI made its January 23, 2008 public announcement regarding Albuferon, as

the price of HGSI stock declined, the Hedge Fund Defendants went back into the market and re-

purchased 1.5 million more shares of HGSI common stock, at reduced prices. These shares

purchased on January 23, 2008 were sold at a profit between January 24 and 31, 2008.

7. Skowron later attempted to cover up his conduct. Among other things, in

February 2008, after the SEC informed FrontPoint’s counsel that it was investigating the Hedge

Fund Defendants’ January 22, 2008 block trade of HGSI stock, FrontPoint’s counsel scheduled

Skowron’s interview with the SEC. Skowron then contacted Benhamou, informed him of the

SEC’s investigation, and informed him that FrontPoint’s counsel wanted to interview Benhamou.

Skowron encouraged Benhamou to deceive FrontPoint’s counsel by falsely telling them that

Skowron and Benhamou had not discussed non-public information about the Albuferon trial but


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had only discussed the “basket of drugs” relating to the treatment of hepatitis C and other

diseases of the liver. Benhamou acquiesced. Later, in April 2008, while in Milan, Italy for a

liver conference, Skowron made a cash payment to Benhamou, after a failed prior attempt to do

so in Boston, Massachusetts in February 2008. Similarly, when Benhamou told Skowron he no

longer could afford counsel during the SEC’s investigation, Skowron offered to pay the fees of

the French law firm which then represented Benhamou.

8. By this conduct, all of the Defendants violated the antifraud provisions of the

federal securities laws, including Section 10(b) of the Securities Exchange Act of 1934

(“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule l0b-5 thereunder [17 C.F.R § 240]. All of the

Defendants are also liable under Section 20A of the Exchange Act [15 U.S.C. § 78t-1], due to

their unlawful insider trading actions. In addition, FrontPoint, the Investment Advisor

Defendants and Skowron are liable under Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)]

as “controlling persons” of the Hedge Fund Defendants.

JURISDICTION AND VENUE

9. The claims alleged herein arise under Sections 10(b), 10b-5, 20A, and 20(a) of the

Exchange Act, 15 U.S.C. §§ 78j(b), 78t-1, 78t(a), and 17 C.F.R. § 240. Jurisdiction and venue

are proper pursuant to Section 27 of the Exchange Act, 15 U.S.C. § 78aa. Certain of the acts,

practices, transactions, and courses of business constituting the violations alleged herein

occurred within this judicial district.

THE PARTIES

PLAINTIFFS

10. Albert Brodzinsky and Evelyn Brodzinsky are individuals residing in

Maryland. As detailed in the attached Schedule A, Mr. and Mrs. Brodzinsky bought 1,000


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shares of HGSI at $11.3299 on January 3, 2008, contemporaneous with the Hedge Fund

Defendants’ sales of HGSI common stock while in possession of material negative non-public

information. Mr. and Mrs. Brodzinsky also paid a commission of $9.99 for a total transaction

cost of $11,339.89.

DEFENDANTS

11. Yves Benhamou, M.D., age 50, is a citizen and resident of France. He is a

medical doctor who is widely known in medical communities in Europe and the United States as

an expert in the treatment of hepatitis C and other diseases of the liver. In fact, on or about

August 11, 2009, during testimony to the SEC, Skowron described Benhamou as a “thought

leader in the area of [h]epatitis” with whom he would have spoken about Albuferon. Throughout

the period covered by this Complaint, Benhamou was the Chief of Department, Clinical

Research in Hepatology, Hôpitaux de Paris-Pitié-Salpétrière and an Associate Professor of

Hepatology at the Hôpitaux de Paris-Pitié-Salpétrière in Paris, France. He was also a clinical

investigative physician for HGSI and was involved with the clinical trial for Albuferon in two

capacities, as: (i) a member of the Steering Committee that oversaw Phase 3 of the trial and (ii)

an investigative physician and “country lead” for France and other parts of Europe during Phase

2b and 3 of the trial. By virtue of his role in the clinical trial, and in accordance with the terms of

his contract with HGSI, Benhamou owed HGSI a duty to hold in strict confidence all information

learned in connection with his participation in the HGSI clinical trial and to use such information

only for the benefit of HGSI. In addition, from approximately March 2006, Benhamou had an

exclusive consulting agreement with Guidepoint Global, the expert networking firm that paid

Benhamou to consult with its clients, such as FrontPoint and its portfolio managers, including

Skowron. Benhamou also warranted, as part of his agreement with Guidepoint Global, that he


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would not disclose any confidential information (including confidential information learned from

clinical trials) to the firm or its consulting clients. On April 11, 2011, Benhamou pled guilty,

pursuant to a cooperation agreement with the United States, to four-count Information charging

him with conspiracy to commit securities fraud, securities fraud, conspiracy to obstruct justice,

and making false statements, all in connection with the insider trading scheme involving HGSI

securities described herein.

12. Joseph F. “Chip” Skowron III, M.D., PhD., age 41, resides in Greenwich,

Connecticut. Skowron is a medical doctor who, throughout the period covered by this

Complaint, was a Managing Director of Morgan Stanley, an executive officer of the six

Investment Advisor Defendants, and a co-portfolio manager of the six Hedge Fund Defendants.

FrontPoint hired Skowron, a doctor by training, in 2003 to manage investments in healthcare

stocks. Skowron shared responsibility for FrontPoint’s investment decisions primarily with two

co-portfolio managers, Co-Portfolio Manager 2 and Co-Portfolio Manager 3. Between Skowron,

Co-Portfolio Manager 2, and Co-Portfolio Manager 3, Skowron was primarily responsible for,

among other things, the Hedge Fund Defendants’ investment decisions related to public

companies involved in the development of drugs intended to treat hepatitis C. Skowron worked

in the Connecticut and New York offices of Morgan Stanley and FrontPoint. Skowron was put

on administrative leave from FrontPoint on or about November 2, 2010, and was ultimately

terminated. Skowron’s compensation in 2007 and 2008 was linked to the performance of the

hedge funds that he managed for FrontPoint and the fees earned by the funds’ investment

advisor/management company.

(a) Throughout his employment at Morgan Stanley, Skowron was aware of and

understood that Morgan Stanley’s Code of Conduct and FrontPoint’s Trading Policy and Code of


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Ethics (“Trading Policy”) prohibited him from trading, personally or on behalf of clients, on the

basis of material non-public information or communicating material non-public information to

others. Indeed, during the six-week period in which he traded on material non-public

information about the Albuferon trial, Skowron even signed a statement acknowledging that he

understood the FrontPoint Trading Policy and updates thereto.

(b) Among other things, the Trading Policy prohibited Skowron from engaging in

insider trading by “trading either personally or on behalf of clients or others, on the basis of

material non-public information or communicating material non-public information to others in

violation of the law.” The Trading Policy also informed Skowron that a consultant who has a

confidential relationship with a company may be a “temporary insider” and that “non-insiders”

can acquire the fiduciary responsibilities of insiders as “tippees” if “they are aware or should

have been aware that they have been given confidential information by a shareholder who has

violated his fiduciary duty to the company’s shareholders.” Skowron was also informed by the

Trading Policy that, “[u]nder the ‘misappropriation’ theory [of insider trading], liability is

established when trading occurs on material non-public information that is stolen or

misappropriated from any other person.”

13. FrontPoint Partners LLC is a hedge fund sponsor which, at all times relevant to

this Complaint, was an indirect wholly-owned subsidiary of Morgan Stanley and is directly, or

through the Investment Advisor Defendants, the investment advisor to the six Hedge Fund

Defendants. It is based in Greenwich, Connecticut with additional offices in New York and

London. FrontPoint is a registered investment advisor under the U.S. Investment Advisers Act

of 1940. On or about November 2, 2010, FrontPoint placed Skowron on administrative leave.

FrontPoint ultimately terminated Skowron’s employment.


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14. FrontPoint Healthcare Flagship Fund, L.P. (f/k/a/ FrontPoint Healthcare

Fund, L.P.) was a Delaware limited partnership whose stated investment strategy was to take

long and short positions primarily in equity securities of healthcare and healthcare-related

companies predominantly in the United States. Skowron was, at all times covered by this

Complaint, a co-portfolio manager of this fund. In his capacity as an executive officer of the

fund’s general partner, Skowron had discretionary authority to select trades and determine the

allocation of the fund’s investments.

15. FrontPoint Healthcare Horizons Fund, L.P. was a Delaware limited

partnership whose stated investment strategy was to take long and short positions primarily in

equity securities of healthcare and healthcare-related companies predominantly in the United

States. The FrontPoint Healthcare Horizons Fund, L.P. sought to have a longer investment

horizon than the FrontPoint Healthcare Flagship Fund, L.P. Skowron was, at all times relevant

to this Complaint, a co-portfolio manager of this fund. In his capacity as an executive officer of

the fund’s general partner, Skowron had discretionary authority to select trades and determine

the allocation of the fund’s investments. Skowron was also a limited partner and personally

invested in this fund.

16. FrontPoint Healthcare I Fund, L.P. was a Delaware limited partnership whose

stated investment strategy was to take long and short positions primarily in equity securities of

healthcare and healthcare-related companies predominantly in the United States. The FrontPoint

Healthcare I Fund, L.P. had a similar horizon and strategy to the FrontPoint Healthcare Flagship

Fund, L.P. except it contained assets subject to the fiduciary provisions of the Employee

Retirement Income Security Act of 1974 (“ERISA”). Skowron was, at all times relevant to this

Complaint, a co-portfolio manager of this fund. In his capacity as an executive officer of the


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fund’s general partner, Skowron had discretionary authority to select trades and determine the

allocation of the fund’s investments.

17. FrontPoint Healthcare Flagship Enhanced Fund, L.P. (f/k/a/ FrontPoint

Healthcare Fund 2X, L.P.) was a Cayman Islands exempted limited partnership whose stated

investment strategy was to take long and short positions primarily in equity securities of

healthcare and healthcare-related companies predominantly in the United States. The FrontPoint

Healthcare Flagship Enhanced Fund, L.P. sought to replace the portfolio of the FrontPoint

Healthcare Flagship Fund, L.P., but employed substantially more leverage to target a gross

exposure and net exposure that is two times that of the FrontPoint Healthcare Flagship Fund,

L.P. at the beginning of each month. Skowron was, at all times covered by this Complaint, a co-

portfolio manager of this fund. In his capacity as an executive officer of the fund’s general

partner, Skowron had discretionary authority to select trades and determine the allocation of the

fund’s investments. Skowron was also personally invested in this fund through its onshore

feeder fund, FrontPoint Onshore Healthcare Fund 2X, L.P., of which he was a limited partner.

18. FrontPoint Healthcare Long Horizons Fund, L.P. was a Cayman Islands

exempted limited partnership whose stated investment strategy was to take long and short

positions primarily in equity securities of healthcare and healthcare-related companies

predominantly in the United States. The FrontPoint Healthcare Long Horizons Fund, L.P.

sought to employ the same investment process and approach as the FrontPoint Healthcare

Horizons Fund, L.P. but to have a longer investment horizon and greater variability in its net

exposure to the market over time. Skowron was, at all times relevant to this Complaint, a co-

portfolio manager of this fund, and in his capacity as an executive officer of the fund’s general

partner, Skowron had discretionary authority to select trades and determine the allocation of the


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fund’s investments. Skowron was also personally invested in this fund through its onshore

feeder fund, FrontPoint Healthcare Long Horizons Onshore Fund, L.P., of which he was a

limited partner.

19. FrontPoint Healthcare Centennial Fund, L.P. was a Cayman Islands exempted

limited partnership whose stated investment strategy was to take long and short positions

primarily in equity securities of healthcare and healthcare-related companies predominantly in

the United States. Skowron was, at all times covered by this Complaint, a co-portfolio manager

of this fund. In his capacity as an executive officer of the fund’s general partner, Skowron had

discretionary authority to select trades and determine the allocation of the fund’s investments.

20. FrontPoint Healthcare Flagship Fund GP, LLC (f/k/a FrontPoint Healthcare

Fund GP, LLC), a Delaware limited liability company affiliated with FrontPoint, was the

General Partner of and provided investment advice and management services to the FrontPoint

Healthcare Flagship Fund, L.P. Skowron was an executive officer of this company.

21. FrontPoint Healthcare Horizons Fund GP, LLC, a Delaware limited liability

company affiliated with FrontPoint, was the General Partner of and provided investment advice

and management services to the FrontPoint Healthcare Horizons Fund, L.P. Skowron was an

executive officer of this company.

22. FrontPoint Universal GP, LLC, a Delaware limited liability company affiliated

with FrontPoint, was the General Partner of and provided investment advice and management

services to the FrontPoint Healthcare I Fund, L.P. Skowron was an executive officer of this

company.

23. FrontPoint Healthcare Flagship Enhanced Fund GP, LLC (f/k/a FrontPoint

Healthcare Fund 2X GP, LLC), a Delaware limited liability company affiliated with


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FrontPoint, was the General Partner of and provided investment advice and management services

to the FrontPoint Healthcare Flagship Enhanced Fund, L.P. Skowron was an executive officer of

this company.

24. FrontPoint Healthcare Long Horizons Fund GP, LLC, a Delaware limited

liability company affiliated with FrontPoint, was the General Partner of and provided investment

advice and management services to the FrontPoint Healthcare Long Horizons Fund, L.P.

Skowron was an executive officer of this company.

25. FrontPoint Healthcare Centennial Fund GP, LLC, a Delaware limited liability

company affiliated with FrontPoint, was the General Partner of and provided investment advice

and management services to the FrontPoint Healthcare Centennial Fund, L.P. Skowron was an

executive officer of this company.

OTHER RELEVANT PERSONS AND ENTITIES

26. Human Genome Sciences, Inc. (“HGSI”) is a biopharmaceutical company that

is incorporated in Delaware and headquartered in Rockville, Maryland. HGSI’s common stock

is registered with the SEC pursuant to Exchange Act Section 12(b) and quoted on the NASDAQ

Global Market under the ticker symbol HGSI. HGSI is not a defendant in this action and

Plaintiffs make no allegation herein of any wrongdoing by HGSI.

27. Co-Portfolio Managers 2 and 3 were, throughout the period covered by this

Complaint, Managing Directors of Morgan Stanley and members of the FrontPoint healthcare

investment team. Co-Portfolio Managers 2 and 3 worked principally out of FrontPoint’s New

York offices and were, with Skowron, co-portfolio managers of the six Hedge Fund Defendants.

Skowron and Co-Portfolio Managers 2 and 3 shared responsibility for the funds’ investment

decisions. A fourth co-portfolio manager shared responsibility for investment decisions for two


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of the funds. Between the co-portfolio managers, Skowron had primarily responsibility for,

among other things, the funds’ investment decisions relating to companies involved in the

development of drugs intended to treat hepatitis C. The approval of only one co-portfolio

manager was needed to reduce risk in the funds’ portfolios; the approval of two co-portfolio

managers was needed to increase risk in the funds’ portfolios. Upon information and belief,

either Dr. Jason Bonadio, Ajay Bhalla and/or Kevin Caliendo are Co-Portfolio Managers 2 and

3. Plaintiffs do not currently know which individual is Co-Portfolio Manager 2 or Co-Portfolio

Manager 3.

28. FrontPoint Trader is a trader for FrontPoint who, during the relevant time

period, accepted trade orders from the portfolio managers and submitted trades for the Hedge

Fund Defendants through various broker-dealers.

FACTS

I. HGSI’s Expectations for Phase 3 Of The Achieve Trial

29. In or about August 2007, HGSI began conducting a Phase 3 (late-stage

development) clinical trial to test the safety and efficacy of Albuferon, a drug to treat the liver

disease hepatitis C (hereinafter, the “Achieve Trial”). Albuferon is the commercial name for a

long-acting form of interferon alpha, a drug HGSI developed for the treatment of hepatitis C. In

June 2006, HGSI and Novartis entered into an agreement for the clinical development and

commercialization of Albuferon for the treatment of hepatitis C. In October 2006, HGSI

anticipated revenue of as much as approximately $500 million related to its agreement with

Novartis for Albuferon.

30. The Achieve Trial was administered to over 2,250 patients worldwide, in three

arms: (1) a 900-microgram dose of Albuferon, given once every two weeks; (2) a 1,200-


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microgram dose of Albuferon, given once every two weeks; and (3) the standard (180-

microgram) dose of Pegasys, the then-leading hepatitis C drug on the market, given once a week.

31. At the 58th Annual Meeting of the American Association for the Study of Liver

Diseases held in Boston, Massachusetts from November 2 to November 6, 2007 (“2007 AASLD

Conference”), HGSI announced that, if Phase 3 confirmed the findings from Phase 2, HGSI

expected to demonstrate that: (i) the 900-microgram dose of Albuferon was just as effective as

the standard dose of Pegasys, (ii) the 1,200-microgram dose was more effective than the standard

dose of Pegasys, and (iii) both doses of Albuferon improved the quality of life for patients

compared to Pegasys.

32. Throughout Phase 3, HGSI publicly stated its expectation that, if its Phase 3 trial

confirmed the findings of Phase 2, Albuferon could become the “interferon of choice” for the

treatment of hepatitis C. HGSI believed Albuferon had tremendous commercial potential.

II. The Hedge Fund Defendants Acquired Positions In HGSI Throughout 2007 Based On A Belief That The Stock Did Not Fully Reflect The Value of Albuferon 33. From February 1, 2007 through December 3, 2007, the Hedge Fund Defendants

purchased approximately 6.2 million shares of HGSI at an average price of $10.32 per share.

From in or about February 2007 through at least January 2008, Benhamou served on the Steering

Committee of the Achieve Trial.

34. At the time, the investment thesis or rationale for the Hedge Fund Defendants to

own HGSI common stock was the co-portfolio managers’ belief that the stock price was

undervalued and did not fully reflect the competitive opportunities presented by Albuferon. The

co-portfolio managers established an internal price target for HGSI shares of $17 per share.

35. At the close of the market on December 3, 2007, the Hedge Fund Defendants

collectively owned 6,164,500 shares of HGSI, which were allocated among the funds as follows:


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Hedge Fund Defendant

HGSI Shares Held on Dec. 3, 2007

FrontPoint Healthcare Flagship Fund, L.P.

1,872,900

FrontPoint Healthcare Horizons Fund, L.P.

1,802,400

FrontPoint Healthcare I Fund, L.P.

193,900

FrontPoint Healthcare Flagship Enhanced Fund, L.P.

1,379,600

FrontPoint Healthcare Long Horizons Fund, L.P.

760,400

FrontPoint Healthcare Centennial Fund, L.P.

155,300

Total 6,164,500

III. Skowron Set the Stage for Getting Insider Information From Benhamou By Luring Him With Money

36. Throughout the time that Hedge Fund Defendants were investing in HGSI stock,

and earlier, Skowron was cultivating a relationship with Benhamou that ultimately led to

Benhamou sharing with Skowron material non-public information about the Albuferon trial.

37. From in or about March 2006 through at least in or about 2008, Benhamou had an

exclusive consulting agreement with Guidepoint Global, a Manhattan-based expert networking

firm that paid Benhamou to consult with its clients, such as FrontPoint and its portfolio

managers, including Skowron.

38. On or about April 1, 2006, FrontPoint entered into a services agreement with

Guidepoint Global. In that agreement, FrontPoint agreed not to seek out any non-public

information or confidential information concerning any company from Guidepoint Global’s


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expert consultants. Guidepoint Global also required FrontPoint to warrant that it was complying

with United States securities laws in connection with any information provided to it and that

FrontPoint would not enter into separate agreements with Guidepoint Global’s expert

consultants, such as Benhamou. On or about April 1, 2007, FrontPoint and Guidepoint Global

extended the services agreement for an additional year.

39. FrontPoint paid approximately $900,000.00 in annual fees to Guidepoint Global

in order for Skowron and others at FrontPoint to consult with the firm’s medical experts,

including Benhamou.

40. Skowron used the services of Guidepoint Global to arrange telephone

conversations and meetings with Benhamou at various times, including at medical conferences at

which Benhamou’s participation in HGSI’s clinical drug trials of Albuferon was publicly

disclosed.

41. On April 29, 2006, Skowron and Benhamou met for the first time after a group

meeting hosted by Guidepoint Global at the 41st Annual Meeting of the European Association

for the Study of the Liver (“EASL 2006 Conference”). At the conference, there was an oral

presentation of an Albuferon clinical trial report, co-authored by Benhamou, about the interim

results of Phase 2b of the Albuferon clinical trial. HGSI publicized the presentation of these

results through press releases issued on or about March 14 and May 1, 2006. Both press releases

cited Benhamou as a co-author of the presentation.

42. Similarly, on or about October 27, 2006, Skowron and Benhamou had another

meeting at the annual conference of the American Association for the Study of Liver Diseases

(“AASDL 2006 Conference”) in Boston, Massachusetts. In advance of the conference, the

AASLD published abstracts of the clinical drug trial results to be published at the conference.


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Among these published abstracts were two Albuferon clinical trial studies co-authored by

Benhamou. Both abstracts disclosed that Benhamou was an “investigator” for HGSI. On or

about October 31, 2006, HGSI publicized these results through a press release.

43. On or about February 27 and April 14, 2007, HGSI issued press releases about the

presentation and publication of Albuferon clinical trial results, which named Benhamou as a co-

author. An oral presentation of the data was made at the 42nd Annual Meeting of the European

Association for the Study of Liver (“EASL 2007 Conference”) in Barcelona, Spain.

44. At the EASL 2007 Conference on April 12, 2007, Benhamou met Skowron at

Skowron’s hotel for a one-on-one consultation that had been arranged through Guidepoint

Global, after which the two were to continue to dinner with a representative of Guidepoint

Global. On or about February 27 and April 14, 2007, HGSI issued press releases about the

presentation and publication of Albuferon clinical trial results, which named Benhamou as a co-

author. An oral presentation of the data was made at the EASL 2007 Conference.

45. There, in his suite at the Hotel Arts Barcelona, Skowron gave Benhamou an

envelope containing approximately €5,000, which, on that date, was roughly equivalent to

$6,713.00. He told Benhamou it was a present and that Skowron and FrontPoint were happy

with all of their interactions with Benhamou to date.

46. The next day, on April 13, 2007, Benhamou emailed Skowron and, among other

things, asked Skowron about HGSI stock: “What is your thought regarding human genome stock

price within the next 4 months[?]” He concluded the email with a promise to call Skowron “in 8

or 10 days for wines in chambourcy.”

47. In September 2007, while preparing to take a trip to New York with his wife,

Benhamou contacted Skowron and asked for advice on hotels. Skowron asked his assistant to


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make reservations for the Benhamous at the Mandarin Oriental Hotel in New York. The

Benhamous stayed at the Mandarin Oriental for four nights and checked out on September 20,

2007. Skowron paid for their hotel stay, including dinner, which cost $5,152.15, and later

expensed the cost, thereby passing other expense on to five of the Hedge Fund Defendants,

including the FrontPoint Healthcare I Fund, L.P.

48. In or about November 2007, both Skowron and Benhamou attended the AASDL

2007 Conference in Boston, Massachusetts. Benhamou co-authored two abstracts published in

advance of this meeting that announced certain results of the ongoing Albuferon clinical trials.

Both of these abstracts (as well as another abstract co-authored by Benhamou relating to a

different subject) disclosed that Benhamou was a “Consultant/Advisor” to HGSI. On November

6, 2007, one of the Albuferon studies that Benhamou co-authored was presented in open session

at the meeting.

49. On November 3, 2007, while attending the AASDL 2007 Conference, Benhamou

and Skowron met and spoke at a cocktail party hosted by Guidepoint Global at the Westin Hotel.

50. Skowron and Benhamou met again on the evening of November 5, 2007, when

Skowron gave Benhamou a tour of the Boston area, including Harvard Medical School, and

treated Benhamou to dinner and wine at Blue Ginger in Wellesley, Massachusetts. Benhamou

emailed Skowron the next day to thank him for dinner and “the [very] pleasant time spent

discussing with you… I hope that I will have one day the opportunity to do the same for you,

your wife and all the family.” Skowron told him “it’s just the beginning… that was a fantastic

dinner!” On November 6, 2007, Skowron reported to Guidepoint Global that he had a one-on-

one consultation with Benhamou during the AASLD conference. On November 19, 2007,


18

Skowron submitted the receipt from his dinner with Benhamou for reimbursement from

FrontPoint. The cost of dinner was allocated among five of the Hedge Fund Defendants.

51. Additionally, in or about November 2007, Skowron told Benhamou he was

contemplating starting a new biotechnology fund and asked Benhamou if he wanted to be a

consultant or permanent advisor to the fund.

52. Skowron knew at the time that Benhamou served on the Achieve Trial Steering

Committee or was otherwise affiliated with the Achieve Trial. Benhamou’s name had been

publicly associated with the trial. Among other things, Benhamou was listed as a co-author on

several presentations and abstracts related to the Albuferon clinical trial. He presented interim

and final trial results at the EASL 2007 Conference and at the 2007 AASLD Conference and

spoke at seminars arranged by Guidepoint Global, including the following:

• On Saturday, November 3, 2007, Benhamou spoke at a seminar in Boston that had been arranged with certain consulting clients who were also attending the 2007 AASLD Conference. There Benhamou discussed, among other topics, the results of Phase 2b of the Achieve Trial.

• On Monday, November 5, 2007, HGSI formally presented the Achieve Trial’s Phase

2b final results and its presentation slides identified Benhamou as affiliated with the Achieve Trial.

Additionally, beginning no later than November 2007, HGSI circulated materials to the Phase 3

investigators which identified Benhamou as a member of the Steering Committee and thus it was

widely known that Benhamou was affiliated with Phase 3 of the Albuferon trial not only as an

investigator but as a Steering Committee member.

IV. Benhamou Learned Of Material Non-Public Adverse Events During Phase 3 Of The Achieve Trial 53. On November 12 and 29, 2007, two participants who were receiving the 1,200-

microgram dosage of Albuferon in the Achieve Trial suffered serious adverse events of


19

interstitial lung disease as possible side effects of the dosage they were receiving. One of the

patients died shortly thereafter on or about December 1, 2007.

54. As a member of the Achieve Trial’s Steering Committee – a committee of five

doctors who were responsible for overseeing the conduct of the Achieve Trial – Benhamou

learned of the existence and underlying details of these material non-public adverse events no

later than Saturday, December 1, 2007. He learned at the same time that HGSI’s next step was

to alert the Achieve Trial’s Data Monitoring Committee (“DMC”), an independent committee

responsible for overseeing the safety of patients involved in the Achieve Trial. The DMC had

the authority to recommend whether to stop, continue, or modify the Achieve Trial.

55. On or about December 5, 2007, an individual at HGSI sent an email to members

of the Steering Committee indicating that the Albuferon trial’s independent safety committee

believed that the serious adverse events required further examination.

56. Based on its conversations with the DMC, HGSI informed all Steering Committee

members between December 7 and December 8, 2007, that the DMC (i) was considering

recommending a dose reduction to 900 micrograms for all subjects then being treated with 1,200

micrograms of Albuferon and (ii) would hold a meeting during the week of December 10, 2007

to further review and discuss the data and make a recommendation as to how to proceed with the

trial.

57. On Sunday, December 9, 2007, at approximately 8 p.m. EST, HGSI held an

urgent phone conference with Benhamou and other Steering Committee members to plan for the

upcoming meeting with the DMC. HGSI and the Steering Committee were concerned that the

DMC would eliminate the 1,200-microgram arm of the Achieve Trial. They discussed, among


20

other things, putting in place an enhanced patient monitoring plan with intensified focus on

patients with cough and dyspnea.

58. Benhamou participated in the December 9 phone conference from Hawaii where

he was attending HEP DART 2007, a scientific conference dedicated to the advancement of

knowledge about ongoing drug development processes for the treatment of hepatitis B and C.

Benhamou and two other Steering Committee members were scheduled to give (and did give)

presentations at the conference, on December 11 and 12, 2007.

59. On Monday, December 10, 2007, at 10:44 a.m. EST, HGSI emailed all Steering

Committee members a draft proposal – intended for circulation to the DMC in advance of the

upcoming meeting – which set forth a plan for the enhanced monitoring of all participants in the

Achieve Trial and also recommended obtaining further input from pulmonologists. Between

December 10 and 11, 2007, HGSI, Benhamou, and other members of the Steering Committee

had multiple communications in which they discussed and revised the proposal for enhanced

monitoring and prepared for the upcoming DMC meeting.

60. The DMC meeting took place on Wednesday, December 12, 2007, by

teleconference, and occurred in three phases: (i) an initial open session meeting in which the

Steering Committee members and various representatives of HGSI and others participated, (ii) a

closed session meeting with DMC Committee members only, and (iii) a concluding open

session.

61. After hours of deliberation, the DMC decided to allow the Achieve Trial to

continue unchanged in order to allow HGSI time to conduct additional pulmonary screening of

all trial participants, beginning with patients exhibiting ongoing symptoms of cough and

dyspnea. The DMC wanted data on symptomatic patients by Christmas 2007 and stated that,


21

after receiving and reviewing such data, it would reconvene and make its complete

recommendation regarding the 1,200-microgram arm.

62. By no later than 10 p.m. EST on December 12, 2007, all members of the Steering

Committee were aware of the details of the DMC’s non-public recommendation, including its

desire to receive additional data by Christmas 2007.

V. The November/December 2007 Tip and Trades

63. Upon information and belief, on or before December 7, 2007, but after Benhamou

learned of the two non-public cases of interstitial lung disease and that the DMC would be

notified and make a recommendation affecting the future of the Achieve Trial, Benhamou tipped

material negative non-public information about the Achieve Trial to Skowron. Skowron, acting

pursuant to the authority delegated to him by the Investment Advisor Defendants, caused each of

the Hedge Fund Defendants to sell a percentage of their holdings of HGSI common stock based

on the information Benhamou tipped to him.

64. On December 10, 2007, after Benhamou learned that the DMC was considering

modifying the Achieve Trial’s dosage levels and after the Steering Committee and HGSI

formulated an action plan for the upcoming DMC meeting, Benhamou called Skowron from the

HEP DART 2007 Conference. During that call, which lasted approximately five minutes,

Benhamou tipped Skowron additional material non-public information about the Achieve Trial.

Skowron knew or absent deliberate recklessness should have known that the information was

confidential and was disclosed by Benhamou in breach of his duty to HGSI to keep such

information confidential. Nonetheless, acting pursuant to the authority delegated to him by the

Investment Advisor Defendants, Skowron caused the Hedge Fund Defendants to trade on the

information that Benhamou tipped to him.


22

65. At 2:05 p.m. EST on December 10, 2007, as soon as Skowron finished his call

with Benhamou, he called Co-Portfolio Manager 2 and caused Co-Portfolio Manager 2 to place

an order to sell half of the Hedge Fund Defendants’ holdings of HGSI common stock:

Co-Portfolio Mgr. 2: “[FrontPoint Trader] load up to sell ½ the HGSI in the funds; no rush, work w/volume”

FrontPoint Trader: “ok, I am still working order from Friday, sold 335K at 10.83…”

Co-Portfolio Mgr. 2: “[o]k” “keep working more” FrontPoint Trader: “got it”

Co-Portfolio Manager 2, who was in New York at the time, placed the order with FrontPoint

Trader while he was still on the phone with Skowron. Immediately thereafter, Skowron emailed

Benhamou at the HEP DART 2007 Conference and asked Benhamou to keep the information

confidential:

Skowron: “Let’s keep this very confidential. Thanks shaun [sic] for calling. I Will get back to you.”

66. Two days later, on December 12, 2007, Skowron reduced the size of the

December 10 sell order. Before giving FrontPoint Trader any instructions, Skowron exchanged

the following instant message with Co-Portfolio Manager 3, in which he referenced material

non-public information about the Achieve Trial and the hepatitis conference that Benhamou was

attending in Hawaii, but also referenced developments with other products in HGSI’s pipeline:

9:44:00 a.m. EST Skowron: “i think we should reduce the size of our sale in hgsi to 1/3 instead of 1/2”

9:44:16 a.m. EST Skowron: “interferon’s are known to have infections associated with them”

9:44:17 a.m. EST Co-Portfolio Mgr. 3: “reason?” 9:44:28 a.m. EST Skowron: “it’s 2 cases in over 4k

patients” 9:44:33 a.m. EST Co-Portfolio Mgr. 3: “fair pint” 9:44:35 a.m. EST Co-Portfolio Mgr. 3: “point”


23

9:44:47 a.m. EST Co-Portfolio Mgr. 3: “plus movement forward with pipeline”

9:44:51 a.m. EST Co-Portfolio Mgr. 3: “GLP and LPPLA2 [two other drugs HGSI was developing, one for the treatment of diabetes, the other for the control and treatment of cardiovascular disease]”

9:44:52 a.m. EST Skowron: “yeah” 9:44:54 a.m. EST Skowron: “exactly” 9:44:59 a.m. EST Skowron: “people will be bullish on

this” 9:45:04 a.m. EST Co-Portfolio Mgr. 3: “agreed” 9:45:17 a.m. EST Skowron: “the meeting is giong [sic] on

right now in hawiaii [sic] and no one is saying anything about this”

Less than a minute later, Skowron instructed FrontPoint Trader to sell only one-third of the

Hedge Fund Defendants’ holdings of HGSI common stock, instead of one-half.

67. On December 18, 2007, at 2:50 p.m. EST, Skowron cancelled the remainder of

the sell order. Earlier that day, HGSI announced positive results relating to a fourth drug in its

pipeline, ABthrax, for the treatment of inhalation anthrax; HGSI’s stock price and volume were

up on the news. But, by then, FrontPoint Trader had already sold all but 60,000 shares of the

original order, leaving the Hedge Fund Defendants with approximately 3.2 million shares.

68. Between December 7 and 18, 2007, the Hedge Fund Defendants sold over 2.8

million, or 46 percent, of their shares of HGSI common stock at an average price of $10.65 per

share while in the possession of material non-public information concerning HGSI. Each of the

Hedge Fund Defendants sold the following number of HGSI shares:


HGSI Shares Sold Dec. 7 – 18, 2007


849,829


865,171


24


88,100


626,000


364,400


81,000

Total 2,874,500

69. Trading in the portfolios of the Hedge Fund Defendants was accomplished as

follows: FrontPoint Trader would enter instructions to sell a certain percentage of the total HGSI

shares held across all of the Hedge Fund Defendants into a computerized order management

system. Once the shares were sold, the system automatically increased or decreased each Fund’s

position in the stock in accordance with a pre-determined formula.

VI. Benhamou Learned The Date Of The DMC Meeting In Which The DMC Would Deliver Its Final Recommendation 70. Shortly after the DMC made its December 12, 2007 recommendation, Benhamou

received and was asked to comment on a draft communication that HGSI intended to send to the

Achieve Trial investigators, asking them to: (i) run additional pulmonary tests on patients with

ongoing cough or dyspnea and to provide the data to HGSI by December 21, 2007, (ii) contact

all patients every two weeks to assess for symptoms of cough or dyspnea and bring them in for

further evaluation, and (iii) perform pulmonary function tests and chest x-rays on asymptomatic

patients in the next four weeks. In his capacity as an investigator, Benhamou received the

finalized version of the communication on December 13, 2007 and a follow-up communication

that was sent to investigators on December 14, 2007, both of which reiterated that patient visits


25

should be completed and the underlying data faxed to HGSI by December 21. Benhamou knew

by then that the DMC would not meet until late December and probably not until January 2008.

71. Throughout December 2007 and early January 2008, Benhamou and the other

Steering Committee members received from HGSI numerous communications regarding the

incoming test results, which HGSI told Benhamou it was just starting to receive on January 4,

2008. Benhamou also received and was asked to comment on drafts of an HGSI white paper and

presentation slides for the upcoming DMC meeting.

72. By January 8, 2008, the Steering Committee was informed that the DMC would

meet on January 17, 2008 to give its recommendation on the Achieve Trial.

73. Between January 8 and January 18, 2008, Skowron and Benhamou exchanged

numerous emails. The emails were mostly social in nature. Skowron told Benhamou that he was

“desperately trying to find time to get over to Paris before Milan [where the 43rd annual meeting

of the European Association for the Study of the Liver Conference (“EASL 2008 Conference”)

would be held in April 2008],” so he could have dinner with Benhamou. He also invited

Benhamou to his home where, according to his email, “the wine sits and waits for us in my

cellar!” In a January 10 email, Benhamou also asked Co-Portfolio Manager 1 for stock advice,

including advice regarding HGSI stock:

As I am thinking to put money in the stock I would like to have your opinion on: 1. Human Genome, do you think the stock will go up? What price? When? 2. Do you have any information on KING PHARMA?

Any other ideas for the near future[?] In response, the portfolio manager stated, “I think HGSI is a good enough company and not

currently reflecting the value of albuferon… let along the rest of their pipeline… but rest is

VERY high risk. The stock will go up on the albuferon data… this year.”


26

74. Upon information and belief, during one of their January exchanges, Benhamou

tipped additional material non-public information about the Achieve Trial to Skowron, including

information about the DMC meeting. On the morning of January 17, 2008, less than four hours

before the DMC met, Skowron emailed Benhamou and asked, “Want to touch base today?”

VII. Benhamou Learned Of The Steering Committee’s Recommendation

75. The DMC meeting took place at 1:30 p.m. EST on Thursday, January 17, 2008,

by teleconference, and occurred in three phases: (i) an initial open session meeting in which

HGSI, the Steering Committee members, and others participated, (ii) a closed session meeting

with DMC members, and (iii) a concluding open session.

76. After more than an hour of closed session deliberations, the DMC recommended

that (i) the 1,200-microgram arm of the Achieve Trial be stopped and that all patients receiving

that dosage level be given the 900-microgram dose instead and (ii) all patients with interstitial

findings on their chest x-rays (of which there were eighteen) be removed from treatment.

77. Benhamou did not participate in the concluding open session, but, later that

afternoon, at 4:38 p.m. EST, HGSI emailed him and other Steering Committee members the

details of the DMC’s recommendation. The emailed informed Benhamou that, among other

things, “[t]he DMC was clear in their recommendation to drop the 1200 arm – dose reduce all

patients to 900.”

VIII. The January 2008 Tip and Trades

78. On Friday, January 18, 2008, at 9:41 a.m. EST, HGSI sent the Steering

Committee members a second email in which HGSI: (i) detailed the DMC recommendation to

dose reduce all patients on the 1,200-microgram arm to the 900-microgram arm, (ii) requested

guidance from the Steering Committee on how to convey the DMC’s recommendation in a letter


27

to investigators and in a press release, a draft of which was to be ready later that day or over the

weekend, and (iii) requested guidance from Benhamou on how to address concerns that may be

raised by the European Union and other global investigators participating in the trial. HGSI also

requested times at which to call Benhamou to discuss the DMC recommendation.

79. Minutes after receiving this email, Benhamou emailed Skowron asking “When

can I call you?” Skowron responded “now? [number provided].”

80. Less than ten minutes after receiving HGSI’s email, at 9:49 a.m. EST, Benhamou

told HGSI that he was not available and requested a time to call the following day.

81. At 9:50 a.m. EST, exactly one minute after telling HGSI he was not available,

Benhamou contacted Skowron and the two had a conversation in which Benhamou disclosed to

Skowron that HGSI was discontinuing the 1200-microgram dosage part of the clinical trial of

Albuferon as a result of the serious adverse events. Skowron knew that Benhamou was affiliated

with Phase 3 of the trial and that the information tipped by Benhamou was confidential and was

disclosed by Benhamou in breach of his fiduciary duty to HGSI.

82. Within minutes of receiving the tip from Benhamou, Skowron caused each of the

Hedge Fund Defendants to sell their remaining holdings of HGSI common stock based on the

material non-public information Benhamou tipped to him. Specifically, at 9:58 a.m. EST, on

January 18, 2008, Skowron instructed FrontPoint Trader via instant message to sell all remaining

shares of HGSI common stock held by the Hedge Fund Defendants:

Skowron: “[FrontPoint Trader] sell the hgsi” “all of it” FrontPoint Trader: “ok”

Skowron was acting pursuant to the authority delegated to him by the Investment Advisor

Defendants.


28

83. Shortly after receiving Skowron’s instructions, FrontPoint Trader contacted a

certain investment bank (“Investment Bank”) and asked for a bid to buy all remaining 3.2 million

shares of HGSI held by the Hedge Fund Defendants. When Investment Bank came back with a

bid of approximately $10 per share, Skowron and FrontPoint Trader declined the offer and

decided instead to sell the Hedge Fund Defendants’ HGSI shares into the market. By the close

of the markets on January 18, 2008, the Hedge Fund Defendants had sold almost 700,000 shares

of HGSI common stock at an average price of $10.72 a share. Each of the Hedge Fund

Defendants sold the following number of HGSI shares:


HGSI Shares Sold on Jan. 18, 2008


201,800


199,300


20,800


176,100


84,100


15,800

Total 697,100

IX. Benhamou Continued To Receive Information About The Timing And Content Of The Press Release And Investigator Letter Throughout The Long Weekend 84. From Friday, January 18, 2008 through Monday, January 21, 2008, Benhamou

worked closely with executives at HGSI on (i) the content and logistics of the letter to


29

investigators, which was to be issued simultaneously with HGSI’s press release announcing the

dose reduction and (ii) HGSI’s response to questions that were expected to arise from the public

and the Achieve Trial investigators.

85. Benhamou knew, no later than Friday, January 18, 2008, that HGSI planned to

issue its press release during the middle of the following week. He knew, no later than January

21, 2008, that HGSI would issue its press release on Wednesday, January 23, 2008.

86. Upon information and belief, Benhamou tipped additional material non-public

information about the Achieve Trial to Skowron on or before January 22, 2008. On the morning

of Tuesday, January 22, 2008 – the first trading day after the Martin Luther King Holiday

weekend and the day before HGSI was to issue its press release about the dose reduction –

Skowron emailed Benhamou and asked, “[A]re you around for a quick call today. Love to catch

up.”

X. The Other January 2008 Tip And Trade Acceleration

87. Skowron called Benhamou at 10:44 a.m. EST, on January 22, 2008. The phone

call lasted approximately 14 minutes. During that call, Benhamou tipped Skowron additional

material non-public information about the Achieve Trial, including information about HGSI’s

planned press release. Skowron knew or absent deliberate recklessness should have known that

the information was confidential and was disclosed by Benhamou in breach of his duty to HGSI

to keep such information confidential. Pursuant to the authority delegated to him by the

Investment Advisor Defendants, and in response to the information that Benhamou tipped him,

Skowron caused the Hedge Fund Defendants to accelerate their sales of HGSI common stock.

88. While Skowron was still on the telephone with Benhamou, he and FrontPoint

Trader engaged in the following communication via instant message, in which Skowron


30

indicated, among other things, that he expected HGSI’s stock price to drop from approximately

$10 per share to $7 to $8 per share and instructed the trader to become more aggressive with the

sales:

10:49:59 a.m. EST Skowron: “[FrontPoint Trader], try and get a little more aggressive with hgsi”

10:50:08 a.m. EST FrontPoint Trader: “ok” 10:50:33 a.m. EST FrontPoint Trader: “225K out of 980 is pretty

aggressive but I hear you” 10:51:12 a.m. EST Skowron: “i show we still own 2.3m

shares.” 10:51:13 a.m. EST Skowron: “is that right” 10:51:33 a.m. EST FrontPoint Trader: “yes, we held over 3MM” 10:51:37 a.m. EST Skowron: “ok.” 10:51:40 a.m. EST Skowron: “work out of all of it” 10:51:48 a.m. EST FrontPoint Trader: “i AM TRYING” 10:51:51 a.m. EST Skowron: “oh” 10:51:54 a.m. EST Skowron: “ok” 10:53:01 a.m. EST Skowron: “[FrontPoint Trader] let’s

look together at the optino market” 10:53:28 a.m. EST FrontPoint Trader: “optino? Is that Latin for

options?” 10:53:28 a.m. EST Skowron: “i think this stock could see 7

or 8” 10:54:25 a.m. EST Skowron: “we can sell calls?” 10:55:14 a.m. EST FrontPoint Trader: “We need to find someone·

willing to amke [sic] a bid on that many calls and that is problematic in this environment”

The fourth co-portfolio manager saw the instant message and suggested shorting HGSI’s debt as

a hedge.

89. Approximately half an hour later, at 11:28 a.m. EST, Benhamou informed

Skowron that his daughter would be visiting New York and asked if Skowron could recommend

a car service to pick her up at the airport. Skowron said he would make the arrangements and

pay for the car service, and he told Benhamou, “Don’t hesitate to let me know if you need

anything.”


31

XI. The Hedge Fund Defendants Sold All Remaining HGSI Shares In A Block Trade At The End Of The Day On January 22, 2008 90. Throughout the day on January 22, 2008, the Hedge Fund Defendants continued

to sell HGSI shares into the market at an average price of $10.37. Near the end of the trading

day, with almost 2 million HGSI shares remaining, FrontPoint Trader contacted Investment Bank

again and asked for a bid on their remaining shares. Investment Bank came back with a bid of

$9.63 per share for the block trade. Skowron accepted the offer and all remaining shares of

HGSI common stock held by the Hedge Fund Defendants were sold shortly before the close of

the markets.

91. The Hedge Fund Defendants’ sale of HGSI shares on January 22 comprised 47

percent of the total trading volume in HGSI shares that day.

92. In anticipation that HGSI’s announcement on January 23 would cause HGSI’s

stock price to decline, Skowron and the other co-portfolio managers instant-messaged each other

on January 22 to congratulate FrontPoint Trader for having completely sold out of the HGSI

position:

3:36:12 p.m. EST Skowron: “how did we make out on hgsi?”

3:36:13 p.m. EST Skowron: “net” 3:37:11 p.m. EST FrontPoint Trader: “we would have been better

off hitting the $10 bid” 3:37:17 p.m. EST Skowron: “by how much?” 3:37:32 p.m. EST Skowron: “and in the context of a·

market meltdown...i’m not concerned about that” 3:37:36 p.m. EST FrontPoint Trader: “calculating it now” 3:37:42 p.m. EST FrontPoint Trader: “right”

* * * * * 4:10:50 p.m. EST FrontPoint Trader: “HGSi we are flat” 4:11:03 p.m. EST Co-Portfolio Mgr. 2: “nice” 4:11:07 p.m. EST Co-Portfolio Mgr. 3: “awesome”


32

XII. HGSI Issued Its Negative Press Release And The Hedge Fund Defendants Bought HGSI Shares

93. On January 23, 2008, at 7:00 a.m. EST, HGSI issued its press release concerning

the DMC’s recommendation and its decision to stop the 1,200-microgram arm of the Achieve

Trial. As a result of the announcement, HGSI’s share price dropped from $10.02 a share at the

close of the previous day, to $5.62 a share at the close of January 23, 2008, a 44 percent decline.

94. By virtue of having sold all of their holdings (over six million shares) of HGSI

common stock by the close of the prior day, the Hedge Fund Defendants avoided at least $30

million in losses.

95. Representatives of the Investment Bank contacted FrontPoint on January 23, soon

after HGSI issued its press release, and made a request to break the January 22 block trade.

Skowron refused to do so.

96. Nonetheless, on the morning of January 23, 2008, Skowron told his co-portfolio

managers that he still wanted to own HGSI stock and he recommended that, if HGSI’s share

price hit $6, they should buy HGSI shares again. Co-Portfolio Manager 2 opined that, if

Albuferon proves to be safe at the lower (900-microgram) dose level, then the investment thesis

for owning HGSI had not changed. Skowron separately expressed the view that Albuferon

remains the thesis for owning HGSI until the investor base changes.

97. On January 23, 2008, acting pursuant to the authority delegated to him by the

Investment Advisor Defendants, Skowron caused the Hedge Fund Defendants to purchase more

than 2.2 million shares of HGSI common stock at an average price of $5.60 per share. Each of

the Hedge Fund Defendants bought the following number of HGSI shares:


33

Hedge Fund Defendant HGSI Shares Purchased on Jan. 23, 2008


763,541


439,400


79,200


666,900


489,700


0

Total 2,438,741

98. On January 24, 2008, after HGSI’s stock prices had been updated by numerous

analysts, Skowron ordered FrontPoint Trader to sell the shares that had been acquired on January

23 for a quick profit.

8:52:22 a.m. EST Skowron: “also load the hgsi to sell” 8:52:31 a.m. EST Skowron: “27 upgrades today” 8:52:32 a.m. EST FrontPoint Trader: “ok” 8:52:38 a.m. EST Skowron: “we’ll trade around it” 9:52:44 a.m. EST Skowron: “... some more”

99. Between January 24 and 31, 2008, FrontPoint Trader sold at a profit more than

1.5 million of the shares that the Hedge Fund Defendants acquired on January 23, 2008.

100. The co-portfolio managers maintained their investment thesis that HGSI was

undervalued based on Albuferon’s commercial opportunities and maintained their target of $17

per share through at least April 2008.


34

XIII. Skowron Attempted a Cover-Up When His Trading Scheme Came to FrontPoint’s Attention

101. On or about February 13, 2008, the SEC advised FrontPoint that it was

investigating FrontPoint’s January 22, 2008 sale of HGSI stock to the Investment Bank. In

connection with this investigation, FrontPoint’s counsel and the SEC scheduled the interview of

Skowron for February 26, 2008. Skowron thereafter undertook actions to cover up his

wrongdoing.

102. On February 20, 2008, approximately one week before Skowron was scheduled to

be interviewed by the SEC in connection with its investigation into the Hedge Fund Defendants’

January 22 block trade in HGSI stock, Skowron contacted Benhamou by email purportedly to set

up a consultation through Guidepoint Global. Skowron’s email said that he wanted to speak to

Benhamou about “Hep C drug development” and to “set something up for Milan.”

103. On that date, starting at approximately 2:40 p.m. EST, Skowron and Benhamou

spoke for approximately 6.4 minutes. Upon information and belief, during this call, Skowron

told Benhamou about the SEC’s investigation and also that FrontPoint’s counsel wished to

interview Benhamou by phone. Skowron urged Benhamou to deceive FrontPoint’s counsel and

tell them that he never gave Skowron confidential information about the Albuferon trial and only

discussed the “basket of drugs” available for liver disease. Shortly after the conclusion of his 6.4

minute conversation with Benhamou, Skowron emailed Guidepoint Global and reported that he

had a consultation with Benhamou.

104. The next day, at approximately 8:26 a.m. EST, Skowron called Benhamou and

then conferenced in FrontPoint’s counsel and made the introduction. FrontPoint’s telephone

records reflect that the conversation lasted for approximately 21.4 minutes, or, until 8:47 a.m.

EST. Upon information and belief, Benhamou deceived FrontPoint’s counsel on the call and


35

told FrontPoint’s counsel that he did not give Skowron any non-public information about the

Albuferon trial. At 8:50 a.m. EST, FrontPoint’s counsel emailed Skowron and told him that the

call with Benhamou “went well.” Skowron forwarded that email to Benhamou.

105. On or about February 24, 2008, Benhamou traveled to Boston, Massachusetts for

a meeting with a large pharmaceutical company. Skowron knew of the trip in advance and drove

to Boston to take Benhamou to lunch. After the lunch, Skowron drove Benhamou to

Benhamou’s hotel in Boston and attempted to give Benhamou a bag containing two stacks of

U.S. currency wrapped in bands. Benhamou understood that Skowron was offering this money

as payment for the material non-public information about the Albuferon trial that Benhamou had

tipped to Skowron in January 2008. Benhamou, who was slated to fly back to France the next

day, did not accept the money.

106. In April 2008, while in Milan, Italy, for the EASL 2008 Conference, Skowron

met Benhamou at a hotel bar. There, on or about April 22, 2008, Skowron gave Benhamou an

envelope containing U.S. currency worth at least $10,000. He told Benhamou it was in

appreciation of Benhamou’s contributions, consultations, and time. He reiterated that Benhamou

should continue to falsely state that the two had only discussed publicly available information

about the “basket of drugs” available for the treatment of hepatitis C and other diseases of the

liver. Skowron also assured Benhamou that everything would be fine and the SEC’s

investigation would end soon.

107. On or about May 14, 2009, in connection with the SEC’s investigation,

Benhamou testified in an administrative proceeding of the Autorité Des Marchés Financiers, the

French securities regulator, in the presence of two SEC staff attorneys in Paris. Consistent with


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the request made of him by Skowron, Benhamou falsely stated that he did not reveal non-public

information concerning the Albuferon clinical trial to Skowron.

108. Subsequently, on or about August 11, 2009, Skowron provided sworn testimony

to the SEC in an effort to influence the SEC’s investigation. Among other things, Skowron

stated that at the relevant time he did not know who worked on the Albuferon clinical trial; that

he spoke to Benhamou about various drugs to treat hepatitis, including Albuferon, but he didn’t

think they had ever discussed the Albuferon clinical trial; and that he had never given Benhamou

a gift or anything of value.

109. In November 2009, after Benhamou ceased retaining the French law firm that had

earlier represented him in the SEC’s investigation due to costs, Skowron offered to take care of

Benhamou’s attorneys’ fees in connection with that matter.

XIV. The SEC And USA Brought Civil and Criminal Charges Against Benhamou and Skowron and FrontPoint Settled with the SEC

110. On November 2, 2010, the SEC filed a complaint in the United States District

Court for the Southern District of New York against Benhamou. The SEC charged Benhamou

with unlawfully tipping inside information concerning HGSI’s clinical trial for Albuferon in

advance of HGSI’s negative announcement on January 23, 2008. Specifically, the SEC alleged

that Benhamou violated the antifraud provisions of the federal securities laws, Section 17(a) of

the Securities Act of 1933, 15 U.S.C. § 77q(a) and Section 10(b) of the Exchange Act, 15 U.S.C.

§ 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.

111. Also on November 2, 2010, the United States Attorney’s Office filed a parallel

criminal action, also in the United States District Court for the Southern District of New York,

against Benhamou. In the complaint, the United States alleges, based on similar allegations to

those contained in the SEC’s complaint, that Benhamou conspired to commit, and committed,


37

securities fraud. On April 11, 2011, Benhamou plead guilty, pursuant to a cooperation

agreement with the United States, to a four-count Information charging him with conspiracy to

commit securities fraud, securities fraud, conspiracy to obstruct justice, and making false

statements, all in connection with the insider trading scheme described herein involving HGSI

securities. Benhamou is cooperating in the hope of receiving a reduced sentence.

112. A day later, on April 12, 2011, the SEC filed an amended complaint in the United

States District Court for the Southern District of New York, adding Skowron as a defendant in

the civil action against Benhamou. In the amended complaint, the SEC charged Skowron with

compensating Benhamou in return for material non-public information concerning HGSI’s

clinical trial for Albuferon in advance of HGSI’s negative announcement on January 23, 2008.

Specifically, the SEC alleged that Skowron and Benhamou violated the antifraud provisions of

the federal securities laws, Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a) and

Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. §

240.10b-5.

113. Also on April 12, 2011, the United States Attorney’s Office filed a parallel

criminal action, also in the United States District Court for the Southern District of New York,

against Skowron. In the complaint, the United States alleges, based on similar allegations to

those contained in the SEC’s complaint, that Skowron conspired to commit, and committed,

securities fraud, and conspired to obstruct justice.

CLASS ACTION ALLEGATIONS

114. Plaintiffs bring this action as a class action pursuant to Rule 23 of the Federal

Rules of Civil Procedure on behalf of all persons and entities who purchased shares of HGSI

from December 7, 2007 through January 22, 2008, the “Class Period” (the “Class”). Excluded

from the Class are (1) Defendants; (2) members of the immediate family of the individual


38

Defendants; (3) any subsidiaries or affiliates of the Defendants; (4) any person or entity who is,

or was during the Class Period, an investor in or a partner, officer, director, employee or

controlling person of the Defendants; (5) any entity in which any of the Defendants has a

controlling interest; and (6) the legal representatives, heirs, successors or assigns of any of the

excluded persons or entities specified in this paragraph.

115. The members of the Class are so numerous that joinder of all members is

impracticable. While Plaintiffs do not know the exact number of Class members, Plaintiffs

believe that there are many hundreds of members of the Class who purchased shares of HGSI

common stock contemporaneously with the sale of HGSI common stock by Defendants during

the Class Period.

116. A class action is superior to other available methods for the fair and efficient

adjudication of this controversy.

117. Common questions of law and fact exist as to all members of the Class, and

predominate over any questions affecting solely individual members of the Class. Among the

questions of law and fact common to the Class are:

a. Whether the federal securities laws were violated by the Defendants’ acts as

alleged herein;

b. Whether the Defendants engaged in manipulative or deceptive devices or

schemes to defraud in violation of Section 10(b) or the Exchange Act and Rule

10b-5;

c. Whether the Defendants are liable to the Plaintiffs and the Class for insider

trading pursuant to § 20A of the Exchange Act;


39

d. Whether FrontPoint, the Investment Advisor Defendants, and Skowron are

liable to the Plaintiffs and the Class as “controlling persons” of the Hedge Fund

Defendants pursuant to § 20(a) of the Exchange Act;

e. The relief to which Plaintiffs and the members of the Class are entitled,

including disgorgement, constructive trust, and an accounting.

118. Plaintiffs’ claims are typical of the claims of the members of the Class. Plaintiffs

will fairly and adequately protect the interests of the members of the Class and have retained

counsel competent and experienced in class and securities litigation. Plaintiffs have no interests

that are adverse or antagonistic to the Class.

119. A class action is superior to other available methods for fair and efficient

adjudication of the controversy since joinder of all members of the Class is impracticable.

Furthermore, the expense and burden of individual litigation make it impossible for the Class

members individually to redress the Defendants’ wrongful conduct. Plaintiffs know of no

difficulty which will be encountered in the management of this litigation which would preclude

its maintenance as a class action.

COUNT I

FOR VIOLATIONS OF SECTION 10(b) OF THE EXCHANGE ACT AND RULE 10b-5

(Against All of the Defendants)

120. Plaintiffs repeat and re-allege each of the allegations set forth above.

121. Benhamou, because he had entered into a special confidential relationship in the

conduct of HGSI’s business, owed a fiduciary duty to HGSI and its shareholders. Benhamou

breached that fiduciary duty when he disclosed material adverse information about the clinical


40

trials for Albuferon to Skowron. Benhamou benefitted personally – and intended to benefit – as

a result of the information he disclosed.

122. Skowron knew the position that Benhamou occupied and knew that the

information Benhamou disclosed about the clinical trials for Albuferon was in violation of

Benhamou’s fiduciary duty to HGSI and its shareholders. Thus, Defendants had a duty to

disclose the material adverse information about the clinical trials for Albuferon prior to trading in

HGSI stock with the investing public, or to abstain from trading in HGSI stock. Defendants’

duty ran to Plaintiffs and all members of the Class who purchased HGSI stock during the same

period in which the Hedge Fund Defendants sold HGSI stock. In breach of their duty to disclose

or abstain, Skowron, acting individually and in his capacity as principal for the Investment

Advisor Defendants and co-portfolio manager of the Hedge Fund Defendants, caused the Hedge

Fund Defendants to sell HGSI stock based upon the material non-public information Skowron

had received from Benhamou without making the required disclosures.

123. During the period between December 7 and January 22, 2008, inclusive,

Skowron, acting individually and in his capacity as principal for the Investment Advisor

Defendants and co-portfolio manager of the Hedge Fund Defendants, caused the Hedge Fund

Defendants to sell over six million shares of HGSI common stock while in the possession of

material non-public information concerning HGSI. Defendants had a duty to abstain or disclose,

and breached their duty when they sold HGSI stock without publicly disclosing such information

prior to their sales during the Class Period.

124. As described above, all of the actions of all of the Defendants herein, except

Benhamou, in connection with the sale of the Hedge Fund Defendants’ HGSI stock during the

Class Period were initiated, caused, and directed by Skowron, who was an officer, director, or


41

authorized agent of all of the Defendants herein, except Benhamou. Accordingly, Skowron’s

scienter is imputed to all of the other Defendants except Benhamou.

125. Defendants violated Section 10(b) of the Exchange Act and Rule 10b-5

promulgated thereunder in that, as alleged above, in connection with the purchase and sale of

HGSI stock they: (a) employed devices, schemes, and artifices to defraud; (b) omitted material

facts that they were under a duty to disclose; or (c) engaged in acts, practices, and a course of

business that operated as a fraud or deceit upon the purchasers of HGSI common stock during

the Class Period.

126. Defendants, except Benhamou, also violated Section 10(b) of the Exchange Act

and Rule 10b-5 as “tippees.” They possessed material non-public information regarding HGSI,

which the tipper, Benhamou, disclosed to them. The tippees, all of the Defendants except

Benhamou, traded or caused the Hedge Fund Defendants to trade in HGSI stock during the Class

Period while in possession of the non-public information provided by Benhamou. Those

Defendants knew or should have known that Benhamou had violated a relationship of trust by

relaying the information and that Benhamou benefited from the disclosures to the Defendants

through the compensation he received as a result of his consulting relationship and arrangements

with the Defendants.

127. Defendant Benhamou is liable under Section 10(b) of the Exchange Act and Rule

10b-5. He possessed confidential, material non-public information regarding HGSI’s trial of

Albuferon. Benhamou acted with scienter. Benhamou knew, should have known, or recklessly

disregarded that the information he possessed was highly confidential and could materially affect

the marketplace for HGSI shares. On numerous occasions he tipped that information to

Skowron, with whom he had a consulting relationship and friendship, with the expectation of


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receiving a benefit. In making these disclosures, Benhamou violated fiduciary duties or similar

duties of trust and confidence to HGSI and its shareholders. Benhamou knew or should have

known that Skowron managed trades on behalf of the Hedge Fund Defendants and that Skowron,

by and through the Hedge Fund Defendants, was using the confidential, non-public adverse

information Benhamou was providing to unlawfully sell shares in HGSI. Benhamou is thus

liable for the Hedge Fund Defendants’ trades – directly or indirectly – because he unlawfully

tipped material non-public information to Skowron, who effected trades on behalf of the Hedge

Fund Defendants, controlled the funds, and/or unlawfully tipped the information to all of the

Defendants herein, except Benhamou.

128. The facts alleged herein give rise to a strong inference that Defendants acted with

scienter. Defendants had actual knowledge of the omissions of material facts set forth herein, or

acted with reckless disregard for the truth, in that they failed to ascertain and to disclose such

facts, even though such facts were available to them. For example, as set forth above, Skowron

knew that Benhamou served on the trial’s Steering Committee and owed a duty of confidentiality

to HGSI and its shareholders, but, nonetheless, he on numerous occasions throughout the Class

Period caused the Hedge Fund Defendants to sell their holdings of HGSI common stock while in

possession of material non-public information obtained from Benhamou.

129. As a result of Defendants’ failure to disclose material adverse information about

the clinical trials of Albuferon stock prior to trading in HGSI stock, the price of HGSI stock was

artificially inflated throughout the Class Period.

130. On January 23, 2008, HGSI issued its press release concerning the DMC’s

recommendation and its decision to stop the 1,200-microgram arm of the Achieve Trial. As a


43

result of the announcement, HGSI’s share price dropped from $10.02 a share at the close of the

previous day, to $5.62 a share at the close of January 23, 2008, a 44 percent decline.

131. Had Plaintiffs, the other members of the Class, and the marketplace known of the

material adverse information about the Albuferon trial, which Defendants did not disclose

despite their duty to do so, Plaintiffs and the other members of the Class would not have

purchased such securities or, if they had purchased such securities, they would not have done so

at the artificially inflated prices which they paid.

132. As a result of Defendants’ violation of Section 10(b) of the Exchange Act and

Rule 10b-5, Plaintiffs and the members of the Class purchased HGSI stock prices which were

artificially inflated by reason of Defendants’ omissions concerning the clinical trials for

Albuferon, and suffered damages when the truth was disclosed. In ignorance of the fact that the

market price of HGSI’s common stock was artificially inflated, and relying upon the integrity of

the market in which such shares trade, and/or on the absence of material adverse information that

was known or, with recklessness, disregarded by Defendants but not disclosed by these

Defendants, Plaintiffs and the other members of the Class purchased HGSI stock at artificially

high prices, and were damaged when truthful information was disclosed and the inflation of

HGSI stock’ value was corrected.

133. By reason of the foregoing, Defendants have violated Section 10(b) of the

Exchange Act and Rule 10b-5(b), promulgated thereunder, and are liable to Plaintiffs and the

other members of the Class for damages which they suffered in connection with their purchases

of HGSI securities during the Class Period.


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COUNT II

FOR LIABILITY UNDER SECTION 20A OF THE EXCHANGE ACT

(Against All of the Defendants)


135. The claims set forth herein are brought under Section 20A of the Exchange Act

against all of the Defendants in connection with their insider trading of HGSI stock.

136. The Defendants (excluding Benhamou) knowingly or with deliberate recklessness

sold or caused to be sold over six million shares of HGSI stock during the Class Period while in

the possession of material, adverse, inside, non-public information and thereby avoided at least

$30 million in losses. Plaintiffs and the Class purchased HGSI stock contemporaneous with the

Hedge Fund Defendants’ sales.

137. Pursuant to Section 20A(a) of the Exchange Act, the Defendants are liable to the

Plaintiffs and the Class for all losses avoided by the Hedge Fund Defendants’ sales of HGSI

stock during the Class Period. Plaintiffs and the Class are also entitled to the return of the

amounts by which Defendants have been unjustly enriched through their sales of HGSI shares

during the Class Period and to disgorgement, a constructive trust, and an accounting.

138. Pursuant to Sections 20A(a) and (c) of the Exchange Act, Benhamou, by violating

Section 10(b) of the Exchange Act and Rule 10b-5 by communicating material non-public

information about HGSI to Skowron and the other Defendants, is jointly and severally liable

with, and to the same extent as, the other Defendants.

COUNT III

FOR CONTROL PERSON LIABILITY UNDER SECTION 20(a) OF THE EXCHANGE ACT

(Against FrontPoint, the Investment Advisor Defendants and Skowron)


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140. This Count is brought against FrontPoint, the Investment Advisor Defendants, and

Skowron (collectively, the “Control Person Defendants”) for control person liability under

Section 20(a) of the Exchange Act.

141. Under Section 20(a) of the Exchange Act, “Every person who, directly or

indirectly, controls any person liable under any provision of this title or of any rule or regulation

thereunder shall also be liable jointly and severally with and to the same extent as such

controlled person to any person to whom such controlled person is liable, unless the controlling

person acted in good faith and did not directly or indirectly induce the act or acts constituting the

violation or cause of action.”

142. Each of the Control Person Defendants controlled the Hedge Fund Defendants by

virtue of their positions as investment advisors and/or portfolio managers of the Hedge Fund

Defendants. Each of the Control Person Defendants in fact exercised control over the Hedge

Fund Defendants in connection with the sales of HGSI stock alleged herein.

143. By virtue of their positions as controlling persons of the Hedge Fund Defendants,

and their conduct in causing the Hedge Fund Defendants to sell their shares of HGSI during the

Class Period while in possession of material adverse information about HGSI, the Control Person

Defendants are jointly and severally liable, pursuant to Section 20(a) of the Exchange Act, to the

Plaintiffs and the Class with the Hedge Fund Defendants for the Hedge Fund Defendants’

liability under Counts I and II above.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray for relief and judgment, as follows:

A. Declaring this action to be a proper Class action pursuant to Fed. R. Civ. P. 23;


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B. Awarding compensatory damages against all of the Defendants, jointly and

severally, in favor of Plaintiffs for all losses and damages suffered as a result of the Defendants’

wrongdoing alleged herein, in an amount to be determined at trial, together with interest thereon;

C. Ordering Defendants to return the amounts by which they have been unjustly

enriched;

D. Awarding disgorgement of all profits, benefits, and other compensation obtained

by the Defendants as a result of Defendants’ misconduct alleged herein;

E. Imposing a constructive trust for the benefit of Plaintiffs and Class members on

all of Defendants’ ill-gotten gains and proceeds as a result of Defendants’ misconduct alleged

herein;

F. Ordering a certified accounting of the Defendants’ books and records to

determine the correct compensation owed to Plaintiffs and Class members as a result of

Defendants’ misconduct alleged herein;

G. Awarding Plaintiffs their reasonable costs and expenses incurred in this action,

including a reasonable allowance of fees for Plaintiffs’ attorneys and experts; and

H. Awarding Plaintiffs such other and further relief as the Court may deem just and

proper.

Respectfully Submitted, PLAINTIFFS,

/s/ Edward F. Haber Edward F. Haber (pro hac vice) Michelle H. Blauner (pro hac vice) Ian McLoughlin (pro hac vice) Rachel Brown Shapiro Haber & Urmy LLP 53 State Street Boston, MA 02109


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Telephone: (617) 439-3939 Facsimile: (617) 439-0134 [email protected] [email protected] [email protected] [email protected] Jeffrey S. Nobel (CT 04855) Nancy A. Kulesa (CT 25384) Izard Nobel LLP 29 South Main Street, Suite 215 West Hartford, CT 06107 Telephone: (860) 493-6292 Facsimile: (860) 493-6290 [email protected]

[email protected] Of Counsel: Paul Paradis Michael A. Schwartz Horwitz Horwitz & Paradis 405 Lexington Avenue, 61st Floor New York, NY 100174 Telephone: (212) 986-4500 Facsimile: (212) 986-4501 [email protected] [email protected]


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CERTIFICATE OF SERVICE

I hereby certify that on September 19, 2011, a true copy of the foregoing Second Amended Class Action Complaint was filed electronically. Notice of this filing will be sent by email to all parties by operation of the Court’s electronic filing system or will be served on anyone not registered to accept electronic filing as indicated on the Notice of Electronic Filing. Parties may access this filing through the Court’s CM/ECF System.

/s/ Edward F. Haber Edward F. Haber


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