Two lawyers made nearly £80,000 in unlawful profits after using insider information to buy shares in a small biotech firm on the brink of a large corporate buy out, a court heard today.
Michael McFall, 43, of Bennerley Road, Battersea, south-west London, and Andrew Rimmington, 40, from Childerstone, Liphook, Hampshire, were "desperate" to put cash into NeuTec Pharma shortly before it was purchased by pharmaceutical giant Novartis in 2006, it is alleged.
At Southwark Crown Court today, chief prosecutor Michael Bowes QC claimed the pair made "substantial" profits after receiving information from Andrew King, a close friend of McFall and Neutec's financial director.
The two lawyers and King, 62, of The Chase, Clapham, south London, deny eight counts of insider dealing in relation to the takeover.
Neutec was subject to a £305 million buyout by Novartis in June 2006.
The deal saw founders Professor James Burnie and Professor Ruth Matthews receive in the region of £21 million for the business they set up at the University of Manchester in the late 1990s.
But in court today it was alleged that others profited from the deal through illegal methods.
Prior to it being announced, a series of negotiations saw Novartis up its bid from an opening offer of between 650p to 850p a share.
By the time the deal had been struck this had risen to 1050p.
On the announcement being made public, the share price shot up by more than 80%.
Of those benefiting were Rimmington and McFall.
In the days leading up to the deal, the two lawyers "got stuck in" to buying up shares in the business, the court heard today.
McFall made a profit of £39,261 as a result of the increase in share price.
Similarly his former colleague Rimmington made around £39,988 as a result of the rocketing share price.
It is alleged that both men benefited from insider information.
McFall was close friends to NeuTec's financial director - with the pair sharing a passion for going to see football matches.
In the weeks prior to the deal, King was privy to confidential information regarding the Novartis approach.
"Andrew King was very much a key player in this," Mr Bowes said, adding that he was privy to "confidential information" and had a "very, very hands-on role in the progress of this deal."
Around two weeks before the deal was announced, it was thought that shareholders would not go for the offer price.
But this changed after both firms met without advisors, after which it was decided to proceed with the deal.
It was only after this meeting that McFall and Rimmington decided to buy into the stock, it is alleged.
Despite the stock apparently "flat-lining", McFall was "desperate to get money into the shares", the prosecutor said.
He added that the lawyer opened a share dealing account before embarking on a pre-booked holiday to Ireland.
Likewise Rimmington opened an account to buy shares in Neutec, the court was told.
The share purchases took place just months before both lawyers were due to settle large tax bills. McFall had a liability of £53,319 due by the end of July, with Rimmington needing to pay the taxman £40,841.
Was it "the most astonishing coincidence" that the pair put their cash into a flat-lining share price shortly before it shot up, Mr Bowes asked the Jury.
"No, of course it wasn't," he said, adding: "It was insider dealing and that is why they did it."
The three men face a maximum sentence of seven years in jail if found guilty.