SEC Charges Former Drug Manufacturer Executive with Unlawful Insider Trading in Connection with Scheme to Conceal Quality Control Deficiencies

FOR IMMEDIATE RELEASE
2007-36

Washington, D.C., March 8, 2007 - The U.S. Securities and Exchange Commission today simultaneously filed and settled civil charges against Shashikant C. Shah, formerly Vice President of Quality Control, Quality Assurance and Regulatory Affairs of now-defunct generic drug manufacturer Able Laboratories, Inc., alleging that during a 16-month period, Shah reaped $909,000 in profits by selling Able's common stock while possessing material, non-public information about Able's faulty quality control testing practices. Before halting operations in May 2005 after an internal review uncovered such testing improprieties, Able developed, manufactured and sold at least 40 generic drugs including numerous antibiotic, analgesic and antipsychotic medications.

Linda Chatman Thomsen, Director of the SEC's Division of Enforcement, said, "Today's parallel actions demonstrate the type of successful outcome that results from meaningful, cooperative efforts between regulatory and law enforcement authorities, in this instance including the SEC, FDA, FBI, U.S. Postal Inspection Service, and Department of Justice."

Cheryl Scarboro, SEC Associate Director, said, "This insider trading scheme presents particularly pernicious facts, because the non-public information Shah profited from was of critical importance not only to shareholders, but also to everyone who entrusted their health to Able by purchasing the company's drugs."

Without admitting or denying the allegations in the complaint, Shah consented to the entry of a final judgment permanently enjoining him from violating the antifraud provisions of the federal securities laws and prohibiting him from serving as an officer or director of any publicly traded company for five years. Shah also agreed to pay disgorgement of his ill-gotten gains, prejudgment interest thereon and a civil penalty, in amounts to be determined by the court.

The Commission's complaint, filed in New Jersey Federal District Court, alleges that on eight separate occasions from August 2003 through December 2004, Shah acquired Able common stock by exercising employee stock options and then sold the securities either immediately thereafter or within a few days, for overall profits of $909,000. According to the complaint, at the time he engaged in these transactions, Shah was aware that Able was concealing from the U.S. Food and Drug Administration (FDA) problems with the quality control testing of Able products that resulted in the public release of drugs failing to meet established quality control standards. In May 2005, Able's common stock price fell more than $18 per share, or 75%, in one trading day, after Able discovered faulty testing practices of the type Shah had known about, and the company suspended all product shipments. Able's stock price continued to fall in the ensuing months, and the company eventually declared bankruptcy in July 2005, selling substantially all of its assets five months later.

Also on March 8, 2007, in a related criminal action filed by the United States Attorney's Office for the District of New Jersey, Shah pleaded guilty to one count of conspiracy to commit securities fraud and to distribute misbranded and adulterated drugs. Three former supervisory chemists under Shah, Jose Concepcion, Ashish Macwan and Jyotin Parikh, also pleaded guilty to separate criminal informations charging each with one count of conspiracy to distribute misbranded and adulterated drug products. Shah and the three chemists each face a maximum of five years in federal prison and a $250,000 fine. The issue of restitution will be determined by the sentencing court.

The staff acknowledges the assistance and cooperation of the United States Attorney's Office for the District of New Jersey, the United States Postal Inspection Service, the Federal Bureau of Investigation and the FDA in the investigation of this matter.

For more information, contact:

John Reed Stark
Chief, Office of Internet Enforcement
U.S. Securities and Exchange Commission
(202) 551-4892

  Additional materials: Litigation Release No. 20034

http://www.sec.gov/news/press/2007/2007-36.htm