United States District Court, D. Massachusetts
MEMORANDUM & ORDER
Talwani United States District Judge
convicted Defendants Schultz Chan (“Chan”) and
Songjiang Wang (“Wang”) of one count of
conspiring to commit securities fraud in violation of 18
U.S.C. § 371 and two counts of securities fraud in
violation of 15 U.S.C. §§ 78j(b) and 78ff(a) and 17
C.F.R. § 240.10b-5. It also convicted Chan on an
additional count of securities fraud in violation of 15
U.S.C. §§ 78j(b) and 78ff(a) and 17 C.F.R. §
close of the government's evidence, Wang filed his
Motion for Judgment of Acquittal as to Songjiang Wang
[#240] under Federal Rule of Criminal Procedure 29(a), which
Chan joined through counsel's statement at sidebar. The
court reserved decision. See Fed. R. Crim. P. 29(b).
Following the jury verdict, Defendants filed their Joint
Motion for Judgment of Acquittal and for a New Trial
[#266] pursuant to Federal Rules of Criminal Procedure 29(c)
and 33. For the following reasons, Defendants' motions
succeed on their motions for judgment of acquittal under
Federal Rule of Criminal Procedure 29, Defendants must
“show that the evidence presented at trial, even when
viewed in the light most favorable to the government, did not
suffice to prove the elements of the offenses beyond a
reasonable doubt.” United States v. Acevedo,
882 F.3d 251, 257 (1st Cir. 2018). Where, as here, the court
reserves decision on a motion made before submission to the
jury, the court “must decide the motion on the basis of
the evidence at the time the ruling was reserved, ”
that is, at the close of the government's evidence. See
Fed. R. Crim. P. 29(b). In deciding the Rule 29 motion, this
court must “resolve all credibility disputes in the
verdict's favor.” United States v.
Merlino, 592 F.3d 22, 29 (1st Cir. 2010) (internal
quotations omitted). Further, it must “examine the
evidence - direct and circumstantial - as well as all
plausible inferences drawn therefrom, in the light most
favorable to the verdict.” United States v.
Meléndez-González, 892 F.3d 9, 17 (1st
Cir. 2018) (internal quotations omitted). Viewing the
evidence in such a light, the court's role is to
determine whether “a rational fact finder could
conclude beyond a reasonable doubt that the defendant[s]
committed the charged crime[s].” Id.
case involves Chan's purchases of stock of Merrimack
Pharmaceuticals (“Merrimack”), while Wang was
employed there, and Chan and Wang's purchases of stock of
Akebia Therapeutics (“Akebia”), while Chan was
and Akebia are pharmaceutical companies in the business of
developing new drugs. As part of such development, they
conduct clinical trials to assess a drug's safety and
effectiveness. This process involves three distinct phases.
Phase 1 tests drug safety on a small group. Phase 2 tests
effectiveness and further tests safety on a larger group.
Phase 3 tests effectiveness, safety, and side effects on an
even larger group. Trial Exhibit (“Ex.”) 1.
and Wang's relationship predated their respective
employment at Akebia and Merrimack. According to Federal
Bureau of Investigation (“FBI”) Special Agent
Bryan McKay, Chan admitted during a June 2016 interview that
he and Wang had regular communications and were part of a
close-knit Chinese community. According to FBI Special Agent
Ryan Lane, Wang admitted during a June 2016 interview that he
communicated with Chan through phone calls and text messages,
occasionally met for lunch with Chan during the workday when
Chan lived in Massachusetts, and stayed in touch with Chan
when he lived in San Antonio, Texas, between 2010 and 2012.
Lane testified that Wang stated that he and Chan discussed
work, the pharmaceutical industry, and investing, although
Wang said that he did not talk with Chan about Merrimack or
the drugs that Merrimack was developing. Text and
telephone records admitted at trial confirmed Defendants'
frequent communications with one another.
began working at Merrimack as the company's Senior
Manager of Statistical Programming in December 2011. Ex. 4.
His duties included developing statistical programs used to
analyze datasets for Merrimack's drug studies. According
to Wang's supervisor, Bruce Belanger, Wang was working in
2013 on the biometrics group for the NAPOLI-1 study, a Phase
3 study of the cancer drug MM-398. Belanger Tr. 19:6-17,
project leader, Peter Laivins, described NAPOLI-1 as a Phase
3 study designed to test whether MM-398 “could prolong
survival in patients with metastatic pancreatic
cancer.” Laivins Tr. 7:24 - 8:2 [#280]. As an
“overall survival trial, ” it was structured to
measure how long patients with metastatic pancreatic cancer
survived after the start of receiving treatment. Id.
at 10:20-24. NAPOLI-1 was comprised of two experimental arms
(one MM-398 monotherapy arm and one arm that combined MM-398
therapy with other drugs) and one control arm. Id.
at 16:14-16. It was an open-label, randomized trial, meaning
that only physicians, and not patients, knew whether a
patient was part of one of the experimental arms or the
control arm. Id. at 8:11-15. NAPOLI-1 was to be
complete when the 305th participant died. Id. at
11:2-4. At that time, Merrimack would stop the study and
clean and analyze the data. Id. at 11:8-11.
General Counsel Jeffrey Munsie emailed all Merrimack
personnel on July 18, 2013, to say that while Merrimack would
lift a previously imposed company blackout period prohibiting
employees from trading in Merrimack securities for most
employees on July 22, certain Merrimack employees remained
subject to a blackout based on their “knowledge of
material information that has not been disclosed publicly
(for instance, clinical trial data, a potential financing or
a potential collaboration).” Ex. 10. Seven minutes
later, Munsie sent an email to select Merrimack employees,
including Wang, stating that they were subject to a continued
“material information blackout due to your
potential access to or knowledge of preliminary
data from the MM-398 Phase 3 trial. This blackout will
last through the second full trading day after we issue a
press release with the top-line data for the trial.”
testified that he learned on August 28, 2013, that the
NAPOLI-1 trial had reached its full enrollment goal of 405
participants. Laivins Tr. 9:19-25 [#280]. That day, Merrimack
issued a press release announcing this milestone, which
Currently, there is no approved treatment for patients with
metastatic pancreatic cancer after gemcitabine has failed,
nor is there a clear consensus on the standard of care in
this patient group. Limited data suggest that without
effective treatment, these patients are expected to live only
a few months once they have progressed on first line therapy.
349. The press release also quoted Merrimack's Vice
President and MM-398 Medical Director Eliel Bayever, who
stated: “To our knowledge this is one of the largest
controlled studies ever conducted in this patient population,
which has very few treatment options.” Id.
November 7, Munsie sent an email to Merrimack employees
stating that the company-imposed NAPOLI-1 material
information blackout “will end as of the end of the day
today. However, please remember that the insider trading laws
still apply, so you should not trade if you have any material
non-public information.” Ex. 11. When he testified at
trial, Munsie explained that he sent this email because
Merrimack “no longer expected to receive [its NAPOLI-1]
data in that fourth quarter of 2013 or even the first quarter
of 2014 and that [it] only expected it to be in the second
quarter of 2014.” Munsie Tr. 32:1-6 [#281]. Because the
end date of this blackout had been extended far enough,
Merrimack lifted the blackout. Id. Munsie further
testified that Merrimack publicly announced on the same date
as the email that it now expected to receive NAPOLI-1 data in
the second quarter of 2014. Id. at 32:1-4.
Statistical Analysis Plan, which set forth the protocols for
the study, foreshadowed that, “[i]n the course of data
cleaning and statistical programming development, limited
Merrimack clinical and biometrics personnel may view data for
individual patients that could be unblinding due to the
uniqueness of the visit schedules for each arm.” Ex. 33
at 11-12. Bruce Belanger, who supervised the NAPOLI-1
biometrics group, explained that Wang's statistical
programming work enabled him to view individual patient data,
including enough to determine which treatment a patient
received. Belanger Tr. 14:23-15:4, 19:15-17 [#248].
testified as follows. Wang's role in the biometrics group
was to supervise statistical programming. Belanger Tr. 7:14
[#248]. As part of this role, Wang developed computer
programs to analyze study data. Id. at 7:17-22. In
the summer of 2013, the biometrics group had access to
preliminary data from MM-398. Id. at 18:10-21,
19:6-17, 57:22-58:11. As Belanger explained, Wang was working
on developing the statistical programs for analyzing this
data, and this work provided him with access to the live data
in November 2013. Id. at 14:8-10, 19:6-11. Before
the biometrics group analyzed the data, Belanger testified,
Wang was using the preliminary data exported out of
NAPOLI-1's electronic data capture system to test the
statistical programming software that he was developing.
Id. at 16:20-17:2.
evidence showed that in late November and early December
2013, Chan and Wang engaged in the first of several cash
transactions. The government documented a $4, 000 cash
withdrawal from a checking account in Wang's name on
November 21, 2013, Ex. 250, and another $6, 000 cash
withdrawal from that account on December 2. Id. The
government further documented a December 3 cash deposit of
$10, 000 into Chan's personal checking account, and a
subsequent transfer of $10, 000 from that account into a
newly opened Scottrade brokerage account in Chan's name
(“Chan's Scottrade account”). Id.
The government further documented a December 3 order to
purchase $9, 979.17 of Merrimack stock placed using
Chan's Scottrade account. Ex. 255.
government documented two cash withdrawals totaling $13, 000
from Wang's checking account on December 5, 2013, a
December 6 cash deposit of $12, 000 into Chan's checking
account, and a December 6 transfer of $12, 000 from
Chan's checking account to the Scottrade account. Ex.
250. The government further documented that on December 6, an
order to purchase a total of $12, 006.10 of Merrimack stock
was placed using Chan's Scottrade account. Ex.
this same period, Chan began to make more frequent and larger
purchases of Merrimack shares than he had in the
past. Chan and his wife, Linda Wang,
placed orders to purchase $53, 516.92 of Merrimack stock
on November 19; $58, 343.06 of Merrimack stock on November
21; and $124, 492.47 of Merrimack stock on November 26. Ex.
and Linda Wang continued to place orders to purchase
Merrimack stock through their personal brokerage accounts.
Not including Chan's purchases through the Scottrade
account, Chan and Linda Wang placed orders to purchase a
combined total of $272, 966.44 between December 3 and
December 11, 2013. Ex. 255.
February 3, 2014, Chan placed three separate orders to
purchase a combined total of $139, 820.98 of Merrimack stock.
February 13 or 14, 2014, Belanger's biometrics group
learned that the 305th participant in the NAPOLI-1 trial had
died. Belanger Tr. 21:1-5 [#248]. Belanger testified that the
occurrence of this event triggered the conclusion of the
study and meant that his biometrics team would soon receive
the complete dataset for analysis. Id. at 20:21-22.
government documented a $6, 800 transfer from Chan's
personal bank account to the Scottrade account that took
place on February 24, 2014. Ex. 250. The government further
documented a $6, 000 cash withdrawal from Wang's personal
bank account on February 25 and another $7, 000 cash
withdrawal from another of Wang's personal bank accounts
on February 26. Id. The government further
documented a February 27 $19, 800 cash deposit into
Chan's personal bank account. Id. That same day,
a transfer of $13, 000 was made from Chan's personal bank
account to his Scottrade account took place. Id.
February 27, 2014, Merrimack held an earnings call with the
investing public. Laivins played a speaking role. The
PowerPoint slides from the call were admitted as Trial
Exhibit 18. This presentation described the three-armed
nature of the NAPOLI-1 study. Laivins Tr. 16:13-20 [#280].
Slide Twenty-One described what investors should look for in
the NAPOLI-1 trial results. If either one of the NAPOLI-1
experimental arms were successful, Merrimack planned to file
a New Drug Application with the Food and Drug Administration
(“FDA”). Id. at 16:13-20. Even if the
NAPOLI-1 results did not show that MM-398 led to
statistically significant longer lifespans, but nonetheless
showed it had possible benefits for patients with pancreatic
cancer, Merrimack planned to consider continued development
of the drug. Id. at 16:21- 17:1. If NAPOLI-1 showed
no meaningful difference between the experimental arms and
the control arm, by contrast, this would not bode well for
the drug's continued development. Id. at 17:2-5.
Under all scenarios, Merrimack announced that it planned to
issue a press release regarding top-line data in the second
quarter of 2014, followed by a journal publication and
potential presentation of the results at a medical
conference. Ex. 18 at 21. On February 28, Chan placed an
order from the Scottrade account to purchase $19, 592.34 of
Merrimack stock. Ex. 255.
testified that he received a primary complete dataset for the
NAPOLI-1 trial from the outside vendor that handled
operational aspects of the study on March 5, 2014. Belanger
Tr. 22:10-12, 23:8-24:3 [#248]. This dataset was disseminated
to the biometrics team for analysis. Id. at 24:5-6.
Belanger further testified that Wang's role on the
biometrics team required him to work with this dataset.
Id. at 24:12-17. Further, Belanger testified that
those in biometrics could look at the data and draw
preliminary conclusions. Id. at 27:4-8.
March 6 and March 24, Chan and Linda Wang purchased $515,
999.11 of Merrimack stock from accounts other than Chan's
Scottrade account. Ex. 255. Chan placed an order to purchase
$49, 809.99 shares of Merrimack stock on April 4, then placed
another order to purchase $52, 734.99 shares that same day.
Id. On April 10, Chan placed an order to purchase
$8, 113.95 shares of Merrimack stock. Id.
April 14, at 3:50 p.m., Chan placed an order to purchase $16,
471.49 of Merrimack stock. Id. At 4:50 p.m. on April
14, Chan called Wang. Ex. 268. At 9:42 a.m. on April 15, Chan
placed an order to sell $145, 666.79 of Alexion
Pharmaceuticals stock. Ex. 268. Two hours later, at 11:42
a.m., Wang called Chan. Id. At 3:21 p.m., Chan
placed an order to purchase 33, 400 Merrimack shares - more
than any of his previous Merrimack orders. Id. That
order expired. Id. The next morning, Chan placed an
order to purchase 34, 610 Merrimack shares. Id. That
order was cancelled. Id. On April 17, Chan entered
an order to purchase 32, 522 Merrimack shares. Id.
That order expired. Id.
Saturday, April 19, between 11:30 a.m. and 12:00 p.m.,
Belanger and Wang received an email providing them with
access to the final dataset from the NAPOLI-1 study. Ex. 50;
Ex. 51. After the biometrics team received this email, its
members input the data into the statistical program that Wang
had designed. Belanger Tr. 32:1-4 [#248]. According to
Belanger, the team took roughly an hour to complete its final
analysis of the NAPOLI-1 data. Id. at 31:23-25.
Monday, April 21, at 7:54 a.m., Merrimack CEO Robert Mulroy
emailed all Merrimack employees and announced, “[a]s
you are aware, we expect to receive data for our MM-398 trial
this quarter. While the results are a great source of
excitement internally, they are also a great source of
anticipation externally, especially from the investing
community.” Ex. 12. Mulroy further stated that a
company-wide blackout was beginning as of April 21.
Id. The email instructed recipients that they should
not discuss that they are subject to this blackout, as
“[t]he fact that a blackout is in place is itself
material nonpublic information.” Id.
April 21, at 10:30 a.m., Chan placed an order to purchase 32,
522 Merrimack shares. Ex. 268. The order was executed on
April 21 for $145, 708.55. Id. This was Chan's
largest single executed order to purchase Merrimack stock. On
April 25, Linda Wang placed two orders to purchase a combined
total of $22, 348.13 of Merrimack shares. Ex. 255.
April 26 at 1:27 p.m., Belanger emailed Wang a draft version
of the Merrimack press release that would announce the
positive NAPOLI-1 test results to the public. Ex. 59.
Belanger asked Wang to “[p]lease have a look at the
attached and let me know if you have any concerns about the
presentation of the results.” Id.
Belanger's email forwarded a longer chain of earlier
emails from other individuals, including one from
Merrimack's Director of Corporate Communications that
stated that the version of the release being passed along was
“pretty close to final version at this point, ”
and that “[w]e're still set for this to go out on
May 1 at 6 am.” Id. At trial, Belanger
testified that he asked Wang to review the draft press
release because Wang “was very familiar with the data
and the results.” Belanger Tr. 35:19-21 [#248].
April 28, Chan and Linda Wang placed orders to purchase a
combined total of $67, 810.22 of Merrimack stock. Ex. 255. In
total, the couple purchased $1, 569, 713.91 worth of
Merrimack stock between November 19, 2013, and April 28,
1, 2014, Merrimack issued its press release announcing the
primary endpoint of overall survival in the NAPOLI-1 trial.
Ex. 19. This declared that NAPOLI-1 showed a statistically
significant improvement in overall survival time for those in
the study's combination experimental arm. Id.
The President and Chief Executive Officer of the Pancreatic
Cancer Action Network was quoted as saying, “[t]he
Pancreatic Cancer Action Network's goal is to double
pancreatic cancer survival by 2020. The positive results of
this trial demonstrate progress toward that goal in a disease
for which additional treatment options are urgently needed to
improve patient outcomes.” Id. The release
ended with an announcement that the study was accepted for
presentation at a June 2014 conference, and that Merrimack
would submit a New Drug Application to the FDA for the MM-398
combination regimen in 2014. Id.
share price increased from $4.39 on April 30, 2014 to $6.99
on May 1, 2014 a fifty-nine percent increase. Ex. 275. The
volume of Merrimack shares traded increased from 1, 047, 388
on April 30 to 30, 804, 948 on May 1. Id.
16, 2014, Merrimack General Counsel Jeffrey Munsie emailed
select Merrimack employees believed to have been aware of the
NAPOLI-1 trial results prior to April 30, 2014, and informed
these employees that Merrimack had received a formal inquiry
from the Financial Industry Regulatory Authority
(“FINRA”) “regarding trading in [Merrimack]
securities prior to the announcement of our NAPOLI-1 results
on May 1, 2014.” Ex. 52. Munsie requested that each of
the email recipients send him their full name, Merrimack job
title, home address, and the date they became aware of the
top-line trial results. Id. Wang responded to the
request, writing that he first became aware of the top-line
trial results on April 19, 2014. Ex. 54.
sent another email regarding the FINRA request to select
Merrimack employees on August 21, 2014. Ex. 55. This email
stated that “FINRA has now advanced their inquiry to
the next stage by sending us the attached list of names and
asking if any of you recognize any of these names.”
Id. Included on the attached list was the name
“Chan, Schultz, ” from “San Antonio,
TX.” Ex. 56. As of September 2, Wang had not yet
responded, so Munsie forwarded the August 21 email to Wang
again, asking “[w]ould you be able to respond to this
today?” Ex. 57. On September 3, Wang responded to
Munsie, writing, “I have reviewed the list of
individuals in your email attachment and couldn't
recognize anyone on the list that I know.” Id.
March 2, 2015, Chan sold $98, 219.80 worth of Merrimack stock
from his Scottrade account. Ex. 250. On March 24, $98, 427.26
was transferred from Chan's Scottrade account to his
personal bank account. Id. The next day, Chan wrote
a check from his personal bank account to “Songjiang
Wang” for $84, 143.38. Ex. 355. The subject line of the
check stated that it was ...