WASHINGTON (HedgeWorld.com)--The Federal Trade Commission announced that Scott Sacane, founder of the biotech-equity hedge fund Durus Life Sciences Master Fund Ltd., has agreed to pay a civil penalty to settle a complaint filed Monday (Sept. 26) in federal district court.
The complaint, brought by the U.S. Department of Justice at the request of the FTC, charges that Mr. Sacane failed to make four required premerger notification filings between February and June 2003.
"This significant penalty should put hedge funds, their managers, and securities traders on notice that they are not exempt from filing premerger notification forms when required to do so," said Susan Creighton, director of the FTC's Bureau of Competition, in a statement announcing the fine.
She also said that although the FTC was acting against an individual manager in this case, future enforcement actions resulting from a failure to file could be brought, instead, against the fund itself."
Mr. Sacane founded the Durus fund in 1999. Its original name was Highline Life Sciences Master Fund Ltd. In the late winter and through the spring of 2003, he acquired 70% of the equity of Aksys Ltd., Lincolnshire, Ill., and one-third of the equity of Esperion Therapeutics Inc., Ann Arbor, Mich. That summer, he characterized these purchases as "inadvertent". These purchases involved two distinct crossings of premerger notification thresholds under the Hart-Scott-Rodino Act, but Durus made none of the four filings required thereunder. This was the basis of the FTC's, and the Justice Department's, complaint.
Subsequent to Mr. Sacane's alleged violations, the HSR premerger filing threshold has increased from US$50 million to US$53 million.
Stipulated final orders are for settlement purposes only; that is, they don't constitute an admission by the defendant of any violation of law. Mr. Sacane's lawyer, Matthew S. Dontzin, wasn't available for comment Monday.
The manner in this case of imposing a fine on Mr. Sacane seems somewhat unusual, in that it treats as a matter of antitrust law a fact pattern that seems a characteristic securities-regulatory dispute. The Justice Department explained in its filings with the court that it wasn't following the Antitrust Procedures and Penalties Act, which sets out rules for consent judgments in antitrust litigation. The APPA would have required, for example, a competitive impact statement as a predicate of the consent decree. The Justice Department said that the APPA doesn't apply because it here sought only monetary penalty, not any injunction.
"The legislative history of the APPA does not contain any indication that Congress intended to subject settlements of civil penalty actions to its competitive impact review procedures," said the motion for entry of judgment.
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