SEC charges 3 doctors with insider trading

The Securities and Exchange Commission on Monday charged three Fort Lauderdale, Fla.-area doctors with illegal insider trading.

The three men received more than $500,000 in profits in 2005 from advance knowledge that two unrelated companies were about to be acquired, the agency said.

The SEC alleged in a complaint filed in federal court that Zachariah P. Zachariah illegally purchased over $730,000 in shares of Ivax Corp. after learning that the company had agreed to be purchased by generic drugmaker Teva Pharmaceuticals Inc.

Zachariah served on the board of Ivax and was told by its chief executive about the deal before it was publicly announced in July 2005, the SEC said.

Jeffrey Gutchess, a lawyer for the Zachariah brothers, disputed the SEC's assertion that Zachariah was told of the Teva purchase before his investment. Gutchess said Zachariah purchased shares in Ivax, because as a new board member, he wanted to bring his holdings in line with other directors. He told Ivax's general counsel about the investment, the lawyer said.

Zachariach also notified his brother, Mammen Zachariah, of the purchase agreement, and his brother bought approximately $46,000 of the stock on the last trading day before the deal was disclosed.

The two brothers also illegally bought shares in a second company, Sarasota-Fla. based Correctional Services Corp., before that company also announced in July 2005 that it would be purchased by the GEO Group Inc., the agency said.

Gutchess said the brothers will fight the SEC's "completely unfounded" charges in court.

Zachariah worked as a consultant to GEO and his son worked in the company's finance department, and learned about the impending sale through his close ties to the company, the SEC said.

The brothers also notified a friend, Sheldon Nassberg. The three men illegally purchased more than $390,000 of Correctional stock before the acquisition was announced, the agency said.

Gutchess said Zachariah had invested in correctional companies before and the purchase in question wasn't based on any inside information.

Zachariah is the director of cardiology at Holy Cross Hospital in Ft. Lauderdale, where his brother also works as a cardiologist, the SEC said, while Nassberg is a self-employed endocrinologist.

The agency asked the federal court to bar Zachariah from serving as an executive or on the board of a public company, and to require that the three men surrender their profits and pay a fine.