Securities and Exchange Commission
Litigation Release No. 17767 / October 3, 2002
, Civil Action No. 02C7082 ( D. Coar, J.)(U.S. Dist. Ct. N.D. Ill., filed
October 3, 2002)
SEC Files Insider Trading Case Against Thomas Gibson and the Estate of Harry
Krause
On October 3, 2002, the U.S. Securities and Exchange Commission filed
civil fraud charges in the U.S. District Court for the Northern
District of Illinois against Thomas Gibson and the Estate of Harry
Krause alleging insider trading in the securities of Cell Pathways,
Inc. prior to the announcement on September 22, 2000 that the Food and
Drug Administration (FDA) had denied Cell Pathways' New Drug
Application for Aptosyn, its principal product. According to the
complaint, Thomas Gibson tipped Harry Krause concerning the pending
disclosure. Armed with the information, Harry Krause sold all 22,000
shares of his Cell Pathways stock and avoided losses of over $400,000.
The Commission's complaint alleges that on September 20, 2000, Thomas
Gibson, a former director of Cell Pathways, learned that the FDA had
denied Cell Pathways' New Drug Application. According to the
complaint, within minutes of learning the news, Thomas Gibson called
his longtime friend Harry Krause, who is now deceased, and tipped him.
The complaint alleges that Harry Krause then made multiple phone calls
to his broker and ordered him to sell all 22,000 shares of his Cell
Pathways stock. On the morning of September 21, 2000 all 22,000 shares
of Harry Krause's Cell Pathways stock were sold. On September 22, 2000
after the market closed, Cell Pathways issued a press release
announcing the FDA's decision. Cell Pathways' stock price plummeted
70% after the disclosure and Harry Krause ultimately avoided losses of
over $400,000.
The Commission is seeking a permanent injunction, disgorgement with
prejudgment interest, an officer/ director bar, and a civil penalty
against Thomas Gibson for violating Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission also
seeks disgorgement and prejudgment interest from the Estate of Harry
Krause. Named as Relief Defendants in this matter are Harry Krause's
three children, J.R. Henry Conrad Krause, Elizabeth A. Kallal, and
Georgia R. Krause.
The Commission would like to thank the National Association of
Securities Dealers for its assistance in this matter.
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SNIPPETS:
Securities and Exchange Commission
SEC Files Insider Trading Case Against Thomas Gibson and the Estate of Harry Krause
On October 3, 2002, the U.S. Securities and Exchange Commission filed civil fraud charges in
Thomas Gibson tipped Harry Krause concerning the pending disclosure.
Armed with the information, Harry Krause sold all 22,000 shares of his Cell Pathways stock
The Commission's complaint alleges that on September 20, 2000, Thomas Gibson, a former
According to the complaint, within minutes of learning the news, Thomas Gibson called his
The complaint alleges that Harry Krause then made multiple phone calls to his broker and
Cell Pathways' stock price plummeted 70% after the disclosure and Harry Krause ultimately
The Commission is seeking a permanent injunction, disgorgement with prejudgment interest, an
Named as Relief Defendants in this matter are Harry Krause's three children, J.R. Henry
The Commission would like to thank the National Association of Securities Dealers for its
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