“My take is this deal is dead” states Allen Grunes in Bloomberg: “AMR-US Airways Antitrust Suit Seen as Difficult to Settle”

From Bloomberg:

The challenge brought by the U.S. Justice Department can be compared with its lawsuit seeking to block AT&T Inc. (T)’s proposed takeover of T-Mobile USA Inc. in 2011, said Allen Grunes, an antitrust lawyer with GeyerGorey LLP. AT&T eventually dropped its bid for T-Mobile. “My take is that the deal is dead,” Grunes said. “Based on the complaint, this merger doesn’t look like it can be fixed with divestitures or slot sales.”

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AMR-US Airways Antitrust Suit Seen as Difficult to Settle

 

Allen P. Grunes: “Another Look at Privacy,” 20 Geo. Mason L. Rev. (Summer 2013)

Allen Grunes took a moment to discuss his latest law review article on the intersection of privacy and Antitrust Law and suggests its implications for the future: 

Another Look at Privacy, 20 Geo. Mason L. Rev. (Summer 2013)

“Antitrust law does not often take privacy issues into account, even when construing ‘privacy’ in its broadest sense to include privacy policies, the collection and subsequent use or sale of personal information, and privacy regulation. Issues involving privacy and its flip side, “big data,” occasionally do surface in antitrust matters, but by and large they remain on the margin. There have been a handful of attempts to move privacy more toward the center of the antitrust universe, but they have not been very successful.

In this Article, I first discuss some of the challenges consumer privacy poses and why antitrust has had a difficult time with privacy considerations. Next, I discuss several arguments that a few brave souls have made urging that privacy should be more central to antitrust—especially when consumer data is at the center of a merger, as it was in Google/DoubleClick. I then look at some of the ways that, on the periphery, antitrust law does incorporate privacy issues. Finally, I offer what is hopefully a more nuanced and productive way of thinking about the issue based on several characteristics of online markets, and suggest a few interesting implications for the future.”

Maurice Stucke Quoted in Wall Street Journal’s “Merging Airlines, Concessions May Not Be Enough.”

Excerpt:
“In the case of United Airlines and Continental Airlines, the companies cleared the hurdle after agreeing to lease 18 daily “slot pairs” — the government-issued rights to take off and land – at Newark Liberty International Airport to Southwest Airlines.

‘The DOJ really drew a line in the sand,” said Mr. Stucke. “They basically looked at all of the consolidations up to this point and found that consumers haven’t significantly benefited but rather consumers have been harmed.'”

For entire article, click below:

For Merging Airlines, Concessions May Not Be Enough

 

Justice Department Files Antitrust Lawsuit Challenging Proposed Merger Between US Airways and American Airlines Merger Would Result in U.S. Consumers Paying Higher Airfares and Receiving Less Service; Lawsuit Seeks to Maintain Competition in the Airline Industry

The Department of Justice, six state attorneys general and the District of Columbia filed a civil antitrust lawsuit today challenging the proposed $11 billion merger between US Airways Group Inc. and American Airlines’ parent corporation, AMR Corp.  The department said that the merger, which would result in the creation of the world’s largest airline, would substantially lessen competition for commercial air travel in local markets throughout the United States and result in passengers paying higher airfares and receiving less service.

The Department of Justice’s Antitrust Division, along with the attorneys general, filed a lawsuit in the U.S. District Court for the District of Columbia, which seeks to prevent the companies from merging and to preserve the existing head-to-head competition between the firms that the transaction would eliminate.   The participating attorneys general are:   Texas, where American Airlines is headquartered; Arizona, where US Airways is headquartered; Florida; the District of Columbia; Pennsylvania; Tennessee; and Virginia.

“Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure,” said Attorney General Eric Holder.   “By challenging this merger, the Department of Justice is saying that the American people deserve better.   This transaction would result in consumers paying the price – in higher airfares, higher fees and fewer choices.   Today’s action proves our determination to fight for the best interests of consumers by ensuring robust competition in the marketplace.”

Last year, business and leisure airline travelers spent more than $70 billion on airfare for travel throughout the United States.    In recent years, major airlines have, in tandem, raised fares, imposed new and higher fees and reduced service, the department said.

“The department sued to block this merger because it would eliminate competition between US Airways and American and put consumers at risk of higher prices and reduced service,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “If this merger goes forward, even a small increase in the price of airline tickets, checked bags or flight change fees would result in hundreds of millions of dollars of harm to American consumers.   Both airlines have stated they can succeed on a standalone basis and consumers deserve the benefit of that continuing competitive dynamic.”

American and US Airways compete directly on more than a thousand routes where one or both offer connecting service, representing tens of billions of dollars in annual revenues.   They engage in head-to-head competition with nonstop service on routes worth about $2 billion in annual route-wide revenues.   Eliminating this head-to-head competition would give the merged airline the incentive and ability to raise airfares, the department said in its complaint.

According to the department’s complaint, the vast majority of domestic airline routes are already highly concentrated.  The merger would create the largest airline in the world and result in four airlines controlling more than 80 percent of the United States commercial air travel market.
The merger would also entrench the merged airline as the dominant carrier at Washington Reagan National Airport, with control of 69 percent of the take-off and landing slots.   The merged airline would have a monopoly on 63 percent of the nonstop routes served out of Reagan National airport.   As a result, Washington, D.C., area passengers would likely see higher prices and fewer choices if the merger is allowed, the department said in its complaint.   Blocking the merger will preserve current competition and service, including flights that US Airways currently offers from Washington’s Reagan National Airport.

The complaint also describes how, in recent years, the major airlines have succeeded in raising prices, imposing new fees and reducing service.  The complaint quotes several public statements by senior US Airways executives directly attributing this trend to a reduction in the number of competitors in the U.S. market:

  • President Scott Kirby said, “Three successful fare increases – [we are] able to pass along to customers because of consolidation.”
  • At an industry conference in 2012, Kirby said, “Consolidation has also…allowed the industry to do things like ancillary revenues…. That is a structural permanent change to the industry and one that’s impossible to overstate the benefit from it.”
  • As US Airways CEO Parker stated in February 2013, combining US Airways and American would be “ the last major piece needed to fully rationalize the industry.”
  • A US Airways document said that capacity reductions have “enabled” fare increases.

“The merger of these two important competitors will just make things worse –exacerbating current airline industry trends toward reduced service, increasing fares and increasing passenger fees,” added Baer.

As the complaint describes, absent the merger, US Airways and American will continue to provide important competitive constraints on each other and on other airlines.   Today, US Airways competes vigorously for price-conscious travelers by offering discounts of up to 40 percent for connecting flights on other airlines’ nonstop routes under its Advantage Fares program. The other legacy airlines – American, Delta and United – routinely match the nonstop fares where they offer connecting service in order to avoid inciting costly fare wars.   The Advantage Fares strategy has been successful for US Airways because its network is different from the networks of the larger carriers. If the proposed merger is completed, the combined airline’s network will look more like the existing American, Delta and United networks, and as a result, the Advantage Fares program will likely be eliminated, resulting in higher prices and less services for consumers. An internal analysis at American in October 2012, concluded, “The [Advantage Fares] program would have to be eliminated in a merger with American, as American’s large, nonstop markets would now be susceptible to reactionary pricing from Delta and United.”   And, another American executive said that same month, “The industry will force alignment to a single approach–one that aligns with the large legacy carriers as it is revenue maximizing.”   By ending the Advantage Fares program, the merger would eliminate lower fares for millions of consumers, the department said.

The complaint also alleges that the merger is likely to result in higher ancillary fees, such as fees charged for checked bags and flight changes.   In recent years, the airlines have introduced fees for those services, which were previously included in the price of a ticket. These fees have become huge profit centers for the airlines.   In 2012, domestic airlines generated more than $6 billion in fees from checked bags and flight changes alone.   The legacy carriers often match each other when one introduces or increases a fee, and if others do not match the initiating carrier tends to withdraw the change.   By reducing the number of airlines, the merger will likely make it easier for the remaining carriers to coordinate fee increases, resulting in higher fees for consumers.

The department also said that the merger will make coordination easier among the legacy carriers.   Although low-cost carriers such as Southwest and JetBlue offer consumers many benefits, they fly to fewer locations and are unlikely to be able to constrain the coordinated behavior among those carriers.

American Airlines is currently operating in bankruptcy.   Absent the merger, American is likely to exit bankruptcy as a vigorous competitor, with strong incentives to grow to better compete with Delta and United, the department said. American recently made the largest aircraft order in industry history, and its post-bankruptcy standalone plan called for increasing both the number of flights and the number of destinations served by those flights at each of its hubs.

The department’s complaint describes US Airways executives’ fear of American’s standalone growth plan as “industry destabilizing.”   The complaint states that US Airways worries that American’s growth plan would cause “others” to react “with their own enhanced growth plans…,” and that the resulting effect would increase competitive pressures throughout the industry.   The department said the merger will allow US Airways’ management to abandon these aggressive growth plans and continue the industry’s current trend toward higher prices and less service.

The department’s complaint states that executives of both airlines have repeatedly said that they do not need the merger to succeed.   The complaint states that US Airways’ CEO observed in December 2011, that “A[merican] is not going away, they will be stronger post-bankruptcy because they will have less debt and reduced labor costs.”   US Airways’ executive vice president wrote in July 2012, that, “There is NO question about AMR’s ability to survive on a standalone basis.”   And, as recently as January 2013, American’s management presented plans that would increase the destinations it serves in the United States and the frequency of its flights, and would position American to compete independently as a profitable airline with aggressive plans for growth.

AMR is a Delaware corporation with its principal place of business in Fort Worth, Texas.   AMR is the parent company of American Airlines.   Last year American flew more than 80 million passengers to more than 250 destinations worldwide and took in more than $24 billion in revenue.   In November 2011, American filed for bankruptcy reorganization.

US Airways is a Delaware corporation with its principal place of business in Tempe, Ariz.   Last year US Airways flew more than 50 million passengers to more than 200 destinations worldwide and took in more than $13 billion in revenue.

Law360: GeyerGorey Opens In Dallas With Former DOJ Antitrust Ace

Law360: GeyerGorey Opens In Dallas With Former DOJ Antitrust Ace

By Alex Lawson

Law360, New York (August 07, 2013, 3:34 PM ET) — GeyerGorey LLP established its presence in Texas with a splash this week, securing the services of a former U.S. Department of Justice antitrust prosecutor to open its Dallas office, the firm announced Tuesday.
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Marshall added that the firm has a strong Foreign Corrupt Practices Act compliance program that she hopes to be heavily involved in.

While Marshall carries experience across a wide variety of industry sectors, senior partner Hays Gorey Jr. said her work in the energy sector will be of critical importance to the firm’s Texas operations.

“We are thrilled that Joan has decided to join us,” Gorey said. “She adds deep experience with numerous enforcement agencies and complements our experience in key industries like oil and gas exploration, not to mention the fraud piece.”

At DOJ, Marshall gained notoriety for her work in the wake of Hurricane Katrina, when she led the Antitrust Division’s bribery prosecutions centering on the construction of the levees surrounding New Orleans. She also served on the agency’s Hurricane Katrina Fraud Task Force, which was eventually rolled into the broader-reaching Disaster Fraud Task Force.

Firm co-founder Brad Geyer said Marshall’s work in the disaster fraud arena would dovetail nicely with the firm’s existing portfolio.

“We are very involved in servicing the government contractor and the nonprofit and nongovernmental organization community and we are excited to roll in Joan’s disaster fraud experience into our overall product offerings,” Geyer said. “It is also unusual to have career prosecutors in one firm that worked on the highest profile matters on both the criminal and civil worlds.”

Marshall received her law degree from Southern Methodist University and a Bachelor of Business Administration from the University of North Texas.

–Editing by Katherine Rautenberg.

MainJustice.Com “Former Prosecutor from Shuttered Antitrust Division Office Joins White Collar Firm”

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Former Prosecutor from Shuttered Antitrust Division Office Joins White Collar Firm

Noted Antitrust and Disaster Fraud Prosecutor Joan E. Marshall Joins GeyerGorey LLP

Joan Marshall who prosecuted the worldwide vitamins cartel and brought a series of fraud cases in the aftermath of Hurricane Katrina, has joined the firm as a partner. Previously, Ms. Marshall was with the US DOJ Antitrust Division in the Dallas Field Office. She is the tenth former DOJ prosecutor to join the new boutique law firm in less than a year.Joan Marshall_4small

FOR IMMEDIATE RELEASE

 

PRLog (Press Release) – Aug. 6, 2013 – WASHINGTON, D.C. — GeyerGorey LLP is pleased to announce that Joan E. Marshall, a former Department of Justice prosecutor, has joined the firm as partner. Ms. Marshall will open a new office for the firm, in Dallas, where she will be resident.

Ms. Marshall comes to GeyerGorey from the Antitrust Division of the Department of Justice, where she also served as a prosecutor on the Department’s Disaster Fraud Task Force and its predecessor, the Hurricane Katrina Fraud Task Force. While with the Department of Justice, Ms. Marshall supervised numerous multi-agency investigations of bid rigging, price fixing, mail fraud, wire fraud, bank fraud, bribery, perjury and obstruction of justice.

Ms. Marshall had the distinction of breaking the Dallas Field Office’s acclaimed vitamins cartel case and helped to devise, structure and carry out what became one of the most comprehensive international investigations and prosecutions of all time, resulting in more than $1 billion in collected criminal fines. She led the Antitrust Division’s bribery prosecutions involving construction of the levees surrounding New Orleans after the devastation of Hurricane Katrina. Her experience spans investigations and prosecutions involving numerous industries including wholesale groceries, milk, seafood, medical equipment, oilfield supplies, military moving and storage, road and building construction, and municipal finance.

“We are thrilled that Joan has decided to join us,” said Hays Gorey. “She adds deep experience with numerous enforcement agencies and compliments our experience in key industries like oil and gas exploration, not to mention the fraud piece. Our corporate compliance and competition expertise is a perfect fit in the Dallas-Ft. Worth market, which has the largest concentration of corporate headquarters in the United States.”

Ms. Marshall is a frequent speaker on antitrust enforcement and fraud prevention and detection and has developed numerous training programs. She is a recipient of the United States Department of Justice, Assistant Attorney General’s Award and certificates of appreciation from the United States Department of Homeland Security, Office of Inspector General, and the United States Army Criminal Investigation Command, Major Procurement Fraud Unit.

Robert Zastrow, who was Verizon’s Assistant General Counsel for 15 years before co-founding the firm in October 2012, added, “Joan’s extensive background and expertise nicely complements our firm’s unique philosophy and enriches our solid bench in the White Collar world.” Co-founder, Brad Geyer added: “We are very involved in servicing the government contractor and the non-profit and non-governmental organization community and we are excited to roll in Joan’s disaster fraud experience into our overall product offerings. It is also unusual to have career prosecutors in one firm that worked on the highest profile matters on both the criminal and civil worlds. Joan will give us a strategic presence in the Dallas market, which is home to companies in the airline, technology, energy, banking, medical and defense contracting sectors.”

Headquartered in Washington, D.C., GeyerGorey LLP specializes in white collar criminal defense, particularly investigations and cases involving allegations of economic crimes, such as violations of the federal antitrust laws (price fixing, bid rigging, territorial and customer allocation agreements), procurement fraud, securities fraud, foreign bribery (Foreign Corrupt Practices Act) and qui tam (False Claims Act) and other whistleblower actions. The firm also conducts internal investigations of possible criminal conduct and provides advice regarding compliance with U.S. antitrust, anti-bribery and other laws.

 

 

 

 

 

   

Health Care Clinic Director Sentenced for Role in $63 Million Health Care Fraud Scheme

A former health care clinic director and licensed clinical psychologist at defunct health provider Health Care Solutions Network Inc. (HCSN) was sentenced today in Miami to serve 135 months in prison for her central role in a fraud scheme that resulted in more than $63 million in fraudulent claims to Medicare and Florida Medicaid.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Special Agent in Charge Michael B. Steinbach of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the Miami office of the U.S. Department of Health and Human Services’s Office of Inspector General (HHS-OIG) made the announcement.

Alina Feas, 53, of Miami, was sentenced by U.S. District Judge Cecilia M. Altonaga in the Southern District of Florida.  In addition to her prison term, Feas was sentenced to three years of supervised release and ordered to pay $24.1 million in restitution.

On May 7, 2013, Feas pleaded guilty to one count of conspiracy to commit health care fraud and one substantive health care fraud count. During the course of the conspiracy, Feas was employed as a therapist and clinical director of HCSN’s Partial Hospitalization Program (PHP).  A PHP is a form of intensive treatment for severe mental illness.          HCSN of Florida (HCSN-FL) operated community mental health centers at two locations.  In her capacity as clinical director, Feas oversaw the entire clinical program and supervised therapists and other HCSN-FL personnel.  She also conducted group therapy sessions when therapists were absent, and she was aware that HCSN-FL paid illegal kickbacks to owners and operators of Miami-Dade County Assisted Living Facilities (ALF) in exchange for patient referral information to be used to submit false and fraudulent claims to Medicare and Medicaid.  Feas also knew that many of the ALF referral patients were ineligible for PHP services because many patients suffered from mental retardation, dementia and Alzheimer’s disease.

Feas submitted claims to Medicare for individual therapy she purportedly provided to HCSN-FL patients using her personal Medicare provider number, knowing that HCSN-FL was simultaneously billing the same patients for PHP services.  She continued to bill Medicare under her personal provider number while an HCSN community health center in North Carolina (HCSN-NC) simultaneously submitted false and fraudulent PHP claims.

Feas was also aware that HCSN-FL personnel were fabricating patient medical records. Many of these medical records were created weeks or months after the patients were admitted to HCSN-FL for purported PHP treatment and were used to support false and fraudulent billing to government-sponsored health care benefit programs, including Medicare and Florida Medicaid.  During her employment at HCSN-FL, Feas signed fabricated PHP therapy notes and other medical records used to support false claims to government-sponsored health care programs.

At HCSN-NC, Feas was aware that her co-conspirators were fabricating medical records to support the fraudulent claims she was causing to be submitted to Medicare on behalf of HCSN-NC. She knew that a majority of the fabricated notes were created at the HCSN-FL facility for patients admitted into the PHP at HCSN-NC.  In some instances, Feas signed therapy notes and other medical records even though she never provided services in HCSN-NC’s PHP.

From 2004 through 2011, HCSN billed Medicare and the Medicaid program more than $63 million for purported mental health services.

This case is being investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.  This case was prosecuted by Trial Attorneys Allan J. Medina, former Special Trial Attorney Allan J. Medina, and Deputy Chief Benjamin D. Singer of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Halliburton Agrees to Plead Guilty to Destruction of Evidence in Connection with Deepwater Horizon Tragedy Third Corporate Guilty Plea Obtained by the Deepwater Horizon Task Force

Halliburton Energy Services Inc. has agreed to plead guilty to destroying evidence in connection with the Deepwater Horizon disaster, the Department of Justice announced today.  A criminal information charging Halliburton with one count of destruction of evidence was filed today in U.S. District Court in the Eastern District of Louisiana.

Halliburton has signed a cooperation and guilty plea agreement with the government in which Halliburton has agreed to plead guilty and admit its criminal conduct.  As part of the plea agreement, Halliburton has further agreed, subject to the court’s approval, to pay the maximum-available statutory fine, to be subject to three years of probation and to continue its cooperation in the government’s ongoing criminal investigation.  Separately, Halliburton made a voluntary contribution of $55 million to the National Fish and Wildlife Foundation that was not conditioned on the court’s acceptance of its plea agreement.

According to court documents, on April 20, 2010, while stationed at the Macondo well site in the Gulf of Mexico, the Deepwater Horizon rig experienced an uncontrolled blowout and related explosions and fire, which resulted in the deaths of 11 rig workers and the largest oil spill in U.S. history.  Following the blowout, Halliburton conducted its own review of various technical aspects of the well’s design and construction.  On or about May 3, 2010, Halliburton established an internal working group to examine the Macondo well blowout, including whether the number of centralizers used on the final production casing could have contributed to the blowout.  A production casing is a long, heavy metal pipe set across the area of the oil and natural gas reservoir.  Centralizers are protruding metal collars affixed at various intervals on the outside of the casing.  Use of centralizers can help keep the casing centered in the wellbore away from the surrounding walls as it is lowered and placed in the well.  Centralization can be significant to the quality of subsequent cementing around the bottom of the casing.  Prior to the blowout, Halliburton had recommended to BP the use of 21 centralizers in the Macondo well.  BP opted to use six centralizers instead.

As detailed in the information, in connection with its own internal post-incident examination of the well, in or about May 2010, Halliburton, through its Cementing Technology Director, directed a Senior Program Manager for the Cement Product Line (Program Manager) to run two computer simulations of the Macondo well final cementing job using Halliburton’s Displace 3D simulation program to compare the impact of using six versus 21 centralizers.  Displace 3D was a next-generation simulation program that was being developed to model fluid interfaces and their movement through the wellbore and annulus of a well.  These simulations indicated that there was little difference between using six and 21 centralizers.  Program Manager was directed to, and did, destroy these results.

In or about June 2010, similar evidence was also destroyed in a later incident.  Halliburton’s Cementing Technology Director asked another, more experienced, employee (“Employee 1”) to run simulations again comparing six versus 21 centralizers.  Employee 1 reached the same conclusion and, like Program Manager before him, was then directed to “get rid of” the simulations.

Efforts to forensically recover the original destroyed Displace 3D computer simulations during ensuing civil litigation and federal criminal investigation by the Deepwater Horizon Task Force were unsuccessful.

In agreeing to plead guilty, Halliburton has accepted criminal responsibility for destroying the aforementioned evidence.

The guilty plea agreement and criminal charge announced today are part of the ongoing criminal investigation by the Deepwater Horizon Task Force into matters related to the April 2010 Gulf oil spill.  The Deepwater Horizon Task Force, based in New Orleans, is supervised by Acting Assistant Attorney General Mythili Raman and led by John D. Buretta, who serves as the director of the task force.  The task force includes prosecutors from the Criminal Division and the Environment and Natural Resources Division of the Department of Justice; the U.S. Attorney’s Office for the Eastern District of Louisiana and other U.S. Attorney’s Offices; and investigating agents from:  the FBI; Department of the Interior, Office of Inspector General; Environmental Protection Agency, Criminal Investigation Division; Environmental Protection Agency, Office of Inspector General; National Oceanic and Atmospheric Administration, Office of Law Enforcement; U.S. Coast Guard; U.S. Fish and Wildlife Service; and the Louisiana Department of Environmental Quality.

The case is being prosecuted by Deepwater Horizon Task Force Director John D. Buretta, Deputy Directors Derek A. Cohen and Avi Gesser, and task force prosecutors Richard R. Pickens II, Scott M. Cullen, Colin Black and Rohan Virginkar.

An information is merely a charge and a defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

Former Investment Banker and His Associate Sentenced for Insider Trading Scheme

A former San Francisco investment banker and his college friend were sentenced yesterday to 16 months in prison for their roles in an insider trading scheme involving two impending corporate mergers, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Melinda Haag of the Northern District of California.
Jauyo Lee, or “Jason Lee,” 29, of Palo Alto, Calif., and Victor Chen, 29, of Sunnyvale, Calif., both pleaded guilty on April 16, 2013, to one count of conspiracy to commit securities fraud and one count of securities fraud.
According to the plea agreements, Lee, who worked as an investment banker in the San Francisco office of Leerink Swann LLC, disclosed inside information to Chen, a friend from college, about two impending mergers involving Leerink clients.  Between Aug. 26, 2009, and Sept. 5, 2009, Lee disclosed inside information to Chen about the merger of Leerink’s client, Syneron Medical Ltd., and Candela Corporation, a medical device company publicly traded on the NASDAQ stock market.  Chen used the inside information to buy shares of Candela.  After the merger was announced, Candela’s stock price increased more than 40 percent and Chen sold his shares for a gain of approximately $62,589.
Between June 1 and June 13 of 2010, Lee also provided Chen with inside information about the impending merger of Somanetics Corporation and a subsidiary of Covidien plc.  Leerink was the lead financial advisor to Somanetics, which also was publicly traded on the NASDAQ.  Chen used the inside information to buy shares and options of Somanetics.  Following the merger announcement, the price of Somanetics stock increased more than 30 percent and Chen ultimately realized a profit of approximately $547,510.
Lee and Chen were charged in a criminal information on March 21, 2013.
The sentence was handed down by U.S. District Judge Richard G. Seeborg of the Northern District of California.  Judge Seeborg also sentenced Lee and Chen each to a two-year period of supervised release and ordered that restitution and forfeiture be considered at a subsequent hearing.  Chen paid $610,099 in forfeiture prior to sentencing.
This case was investigated by the FBI with substantial assistance from the Chicago Regional Office of the U.S. Securities and Exchange Commission. It is being prosecuted by Assistant U.S. Attorney Robert S. Leach and Trial Attorney Brian R. Young of the Criminal Division’s Fraud Section with the assistance of Rayneisha Booth and Mary Mallory.
This prosecution is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ Offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants.