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FOR FURTHERINFORMATION CONTACT

AUSA VICKIE E. LEDUC or

MARCIA MURPHY at 410-209-4885October 18, 2011

FOR IMMEDIATE RELEASE

http://www.usdoj.gov/usao/md

FDA CHEMIST PLEADS GUILTY TO USING INSIDER INFORMATION

TO TRADE ON PHARMACEUTICAL STOCK

RESULTING IN ALMOST $4 MILLION IN PROFITS

Failed to Disclose the Illicit Profits on FDA Financial Forms

Greenbelt, Maryland - A Food and Drug Administration (FDA) chemist,

Cheng Yi Liang, age 57, of Gaithersburg, Maryland pleaded guilty today

to securities fraud and making false statements related to a $3.7

million insider trading scheme that spanned nearly five years.

The guilty plea was announced by U.S. Attorney for the District of

Maryland Rod J. Rosenstein; Assistant Attorney General Lanny A. Breuer

of the Justice Departments Criminal Division; James W. McJunkin,

Assistant Director in Charge of the FBIs Washington Field Office; and

Elton Malone, Special Agent in Charge of the Department of Health and

Human Services, Office of the Inspector General (HHS-OIG), Office of

Investigations, Special Investigations Branch.

According to the court documents and statements made during court

proceedings, Cheng Yi Liang has been employed as a chemist since 1996at the FDAs Office of New Drug Quality Assessment (NDQA). Through his

work at NDQA, Liang had access to the FDAs password-protected

internal tracking system for new drug applications, known as the

Document Archiving, Reporting and Regulatory Tracking System (DARRTS),

which is used to manage, track, receive and report on new drug

applications. According to court documents, Liang reviewed DARRTS for

information relating to the progression of experimental drugs through

the FDA approval process. Much of the information accessible on the

DARRTS system constituted material, non-public information regarding

pharmaceutical companies that had submitted their experimental drugs

to the FDA for review.

Mr. Liang used inside information about pharmaceutical companies

information he had access to solely because of his position at the FDA

to pocket millions in illicit profits, said Assistant Attorney

General Breuer. In a shocking abuse of trust, Mr. Liang exploited his

position as a chemist in the FDAs Office of New Drug Quality

Assessment to cash in, using the accounts of relatives and

acquaintances to hide his illegal trading. Now, like many others on

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Wall Street and elsewhere, he is facing the significant consequences

of trading stocks on inside information.

Those who use privileged and valuable information for personal gain,

break the trust placed in them as a government employee and the

integrity of the research they conduct on behalf of the U.S.

government, said Assistant Director in Charge McJunkin of the FBIs

Washington Field Office. This case is the result of long hours and

hard work by the FBI and HHS-OIG Special Agents who are tasked with

enforcing laws and regulations designed to ensure the fair operation

of our financial markets.

Profiting based on sensitive, insider information is not only

illegal, but taints the image of thousands of hard-working government

employees, said Special Agent in Charge Malone of HHS-OIG Special

Investigations Branch. We will continue to insist that federal

government employee conduct be held to the highest of standards.

Liang admitted that from approximately July 2006 through March 2011,

he used the inside information he learned from DARRTS and other

sources to trade in the securities of pharmaceutical companies. Liang

used accounts of relatives, including his son, and acquaintances to

execute the trades (referred to as the controlled accounts). When the

inside information was positive about a companys product, Liang used

the controlled accounts to purchase securities. When the inside

information was negative, Liang would make trades in anticipation of

the stocks downward movement. Liang admitted that he used these

controlled accounts to execute trades to profit from the change in the

companys share price after the FDAs action was made public,

resulting in total profits and losses avoided of more than $3.7million.

For example, on May 21, 2010, the FDA accepted Clinical Data Inc.s

application for Viibryd, an anti-depressant. According to court

documents, on Jan. 6, 2011, HHS-OIG installed software on Liangs work

computer, allowing it to collect screen shots from that computer,

which revealed Liang regularly accessed the DARRTS system and reviewed

information regarding Clinical Datas drug Viibryd. Between Jan. 6,

2011, and Jan. 20, 2011, Liang purchased a total of 46,875 shares of

Clinical Data stock using the controlled accounts. After the markets

closed on Friday, Jan. 21, 2011, news of the FDAs approval of Viibrydwas reported. Clinical Datas stock, which had closed that day at

approximately $15.03 per share opened the following Monday, Jan. 24,

2011, at approximately $24.76 per share. Liang then sold all 46,875

shares of Clinical Data stock in the controlled accounts, netting a

total profit of approximately $384,300.

During the time he was employed by the FDA, Mr. Liang was required to

file a Confidential Financial Disclosure form, disclosing, among other




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things, investment assets with a value greater than $1,000 and sources

of income greater than $200. During the time period of his insider

trading scheme, Liang annually filed these forms and failed to

disclose using the controlled accounts or his income from the illicit

securities trading.

Chief U.S. District Judge Deborah K. Chasanow set a sentencing date of

January 9, 2012, at 12:30 p.m. The maximum penalty for the securities

fraud count is 20 years in prison and a fine of $5 million, or twice

the gross gain from the offense. The maximum penalty for the false

statement count is five years in prison and a fine of $250,000.

As part of his plea agreement, Liang has agreed to forfeit $3,776,152,

including a home and condominium in Montgomery County, Md., along with

funds held in 10 bank or investment accounts.

The U.S. Securities and Exchange Commission (SEC) is currently

pursuing civil charges against Liang and several accounts he

controlled. That action is still pending.

This case is being prosecuted by Assistant U.S. Attorney David Salem

for the District of Maryland, Trial Attorneys Kevin Muhlendorf and

Thomas Hall of the Criminal Divisions Fraud Section and Senior Trial

Attorney Pamela J. Hicks of the Criminal Divisions Asset Forfeiture

and Money Laundering Section. The case was investigated by the FBIs

Washington Field Office and the HHS-OIG.

This case is an example of the close coordination between the

Department of Justice and the SEC, specifically the Market Abuse Unit

of the SECs Enforcement Division. The department recognizes thesubstantial assistance of the SEC, which conducted its own

investigation and referred the conduct to the department.

This law enforcement action is part of President Barack Obamas

Financial Fraud Enforcement Task Force. President Obama established

the interagency Financial Fraud Enforcement Task Force to wage an

aggressive, coordinated and proactive effort to investigate and

prosecute financial crimes. The task force includes representatives

from a broad range of federal agencies, regulatory authorities,

inspectors general, and state and local law enforcement who, working

together, bring to bear a powerful array of criminal and civilenforcement resources. The task force is working to improve efforts

across the federal executive branch, and with state and local

partners, to investigate and prosecute significant financial crimes,

ensure just and effective punishment for those who perpetrate

financial crimes, combat discrimination in the lending and financial

markets, and recover proceeds for victims of financial crimes.




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