A former Morgan Stanley broker was arrested yesterday on charges he passed inside information on an $11 billion takeover to a pal — in return for some cash and a jet-ski dock.
The Securities and Exchange Commission and prosecutors in New Jersey accused Kevin Dowd, 37, of tipping his childhood friend to the 2011 acquisition of Pharmasset before it was made public.
Dowd, who worked in Morgan Stanley’s Aventura, Fla., offices, allegedly learned of the impending deal by Gilead Sciences from one of his supervisors at Morgan Stanley.
The supervisor learned of it from a customer who sat on Pharmasset’s board of directors, it is alleged.
The supervisor told Dowd not to trade on the information, according to the SEC’s complaint. Dowd allegedly wiggled his way out of the instructions by telling a pal in the penny-stock promotion business.
That friend, who was not named, bought Pharmasset’s stock within minutes, and then tipped one of his pals to the deal, prosecutors said.
The following Monday, once the deal was announced, both tippees liquidated their positions for a profit of $708,327.
In return, Dowd got the jet-ski dock and $35,000, which he used “for expensive upgrades to a pool at his home,” the SEC said.
A Morgan Stanley spokeswoman said that Dowd was fired last month for violating company policy and that the firm has been cooperating with the government’s probe.
“Morgan Stanley’s Wealth Management has and will continue to cooperate fully with the SEC and The Department of Justice in this matter.”