US prosecutors have published their indictment of Joe Lewis, the British billionaire whose family owns Tottenham Hotspur FC, who they accuse of orchestrating a “brazen” insider trading scheme to enrich his friends, lovers and private jet pilots.
The 86-year-old resident of the Bahamas pleaded not guilty on Wednesday to 16 counts of securities fraud – which can carry a sentence of up to 20 years – and three counts of conspiracy to commit securities fraud.
He denies the charges. His lawyers said they were the result of an “egregious” error by the US government and that they would defend him vigorously.
In a 29-page document, the US attorney for the southern district of New York, fleshed out the details of its allegations, citing evidence including emails, WhatsApp messages and trading data. The US financial regulator, the Securities and Exchange Commission (SEC), filed its own civil claim against him and three other defendants for insider trading. Lewis has yet to publish a detailed denial.
Here are the allegations, broken down by companies in which Lewis was an investor:
Mirati Therapeutics
Lewis was one of the largest shareholders in Mirati, a US-listed oncology company focusing on therapeutic treatments for cancer patients.
In September 2019, the billionaire was on his yacht, docked in California, when he was visited by an employee of his biotechnology hedge fund. While staying on the yacht, it is claimed the employee received confidential updates from the chief executive of Mirati about the favourable outcome of a clinical trial of a Mirati treatment. Lewis and the employee allegedly discussed how the company’s share price could increase from $80 to above $100 as a result.
A week later, prosecutors claim Lewis, 86, called his 33-year-old girlfriend, Carolyn Carter, and told her to buy Mirati stock, even giving her instructions on how to do so. The next morning, she instructed her broker to do so, saying “time is of the essence”. She bought around 16,400 shares, spending “almost all of her funds”.
A month later, Lewis’s hedge fund obtained new information about the timing of the clinical trial results, according to the indictment. During a flight from San Diego to the Bahamas, where Lewis is based, the billionaire allegedly told the pilots to buy as much Mirati stock as they could.
One of the pilots, Patrick O’Connor, allegedly tipped off a friend about the stock via WhatsApp, saying he had spoken to Lewis and that he “think[s] we have people who know”. Both pilots bought stock the day after flying Lewis to the Bahamas.
After a subsequent flight from the Bahamas to Orlando, Florida, O’Connor again texted a friend advising him to buy Mirati stock, saying that the “boss is helping us out and told us to get ASAP”.
He added: “All conversations on app is encrypted so all good. No one can ever see.”
The same day, the US attorney says, Lewis wired $500,000 to O’Connor and fellow pilot Bryan Waugh, so that they could buy more stock, which they both did. O’Connor again texted his friend, saying: “Boss lent Marty and I $500,000 each for this.” He added: “I was like a little puppy looking up at him. He couldn’t refuse.”
He added that he thought “the boss has inside info” and that he “knows the outcome […] otherwise why would he make us invest”.
According to the indictment, Lewis also recommended that his executive assistant buy stock and gave the same tip to three friends “including one with whom he was romantically involved and another with whom he sometimes played poker in Argentina”. They all bought shares.
On 28 October, Mirati publicly announced favourable results for its trial, sending its shares up nearly 17%. The two pilots, Carter , Lewis, his assistant and his friends all sold their shares for a profit.
The pilots repaid their loans from Lewis the following month, without any interest. Pilot 2’s records stated that it was a “loan payback for MRTX”.
Prosecutors also say that Lewis disguised his shareholding in Mirati, deceiving SEC.
Mirati, which began as a Canadian company, was banned under Canadian law from having any shareholder with more than 19.99% of its stock. Lewis allegedly came up with an elaborate scheme to circumvent this limit by setting up shell companies that bought shares on his behalf.
One, Jasara Investments, was ostensibly owned by an employee of his, the indictment claims. It initially contained shares Lewis had bought for an ex-girlfriend and went on to buy more Mirati stock with funds provided by Lewis. The employee was rewarded with a cut of the profits when shares were sold.
Lewis also set up a trust, called the Newton Trust, purportedly for the benefit of his granddaughter. The US attorney said Lewis considered himself the “beneficial owner” of shares that the trust bought in Mirati.
Between 2013 and 2016, the billionaire allegedly transferred funds to HSBC bank accounts in Switzerland in the two companies’ names to buy more Mirati stock.
The result of this, the US authorities claim, is that Lewis amassed a stake of between 24% and 29% in Mirati, while swearing to the SEC on approximately 13 occasions that he remained below the 19.99% limit.
The extra shares gave him a larger entitlement than he would otherwise have had to “warrants”, financial instruments that entitle an investor to buy or sell stock at a fixed price. This, the US attorney claims, saved him $1m.
In 2018, Lewis ordered Jasara and Newton to sell their shares in Mirati. His employee then transferred $25m in proceeds from an HSBC account to a bank account controlled by Lewis, keeping 7% of the sale proceeds as a “kickback”.
When HSBC’s compliance department asked about the unusually large transfer, the employee “falsely” told the bank that he was repaying a loan from Lewis. Before giving that answer, he ran the explanation past Lewis, who replied that he was “happy” with it.
Australian Agricultural Company
Lewis was a shareholder in Australian Agricultural Company (AAC), listed on the Australian stock exchange, which owns farms and cattle “feedlots” – intensive animal feeding operations – in Queensland and the Northern Territory.
The British billionaire was the majority owner of AAC and two employees of Tavistock, his investment company, served on the board.
In January 2019, Queensland was hit by monsoon flooding, resulting in the drowning of significant numbers of cows. However, given the scale of AAC’s land ownership, it was unclear at first how badly the company had been affected.
One of Lewis’s AAC board members told him that the losses to the company were “material”, that the company did not have insurance for the cattle and that the Australian government would not cover any of its losses, according to the US attorney.
It was then that Lewis is alleged to have advised his two personal jet pilots, Waugh and O’Connor, to sell shares in AAC that they had previously bought “as soon as possible”. The pilots tried to do so but their stockbrokers were unable to execute the trade before AAC made a public statement to the stock market disclosing its losses. Its shares fell more than 12% that day.
When one of the pilot’s stockbrokers told him that the sale had not gone through in time to avoid a loss, the airman wrote back: “Just wish the boss would have given us a little earlier heads up.”
Solid Biosciences
Solid Biosciences (SLDB) is a biotechnology company, listed on the Nasdaq stock exchange, and develops treatments for a genetic disease called Duchenne muscular dystrophy.
Lewis, who was one of the three largest shareholders in SLDB, was told of two imminent company announcements in 2019. First, the company planned to raise $60m. Second, it was preparing to disclose to the market the results of a key clinical trial of one of its products.
In July 2019, the US attorney claims, Lewis was staying at the Four Seasons Hotel in Seoul with Carter. Before news of the planned investment and clinical trials had been made public, prosecutors say, Lewis “tipped” Carter and told her to buy shares in SLDB.
Soon after, she logged into her stockbroking account and bought 150,000 shares for about $700,000. When the stock market heard the positive news the company’s shares rose and she later made an $849,000 profit from selling the shares.
During a flight back to the US on his private jet, Lewis is also alleged to have told his pilots the same information. The tip came too late for them to invest before news of the investment broke but they manage to buy shares prior to information about the clinical trial, booking a profit as a result.
The pilots were ordered not to fly planes pending the outcome of proceedings, during a court hearing on Wednesday.
BCTG Acquisition Corporation
In July 2020, Lewis’s hedge fund set up BCTG Acquisition Corporation, a shell company, with the aim of finding promising businesses and investing in them.
Six months later, BCTG began negotiating a merger with a life sciences company, Tango Therapeutics. In February, Lewis told his pilots to buy shares in BCTG, which they both did the same day. Pilot 1 told his broker to “buy all the BCTG we can”. Both pilots went on to make additional purchases.
As BCTG and Tango continued negotiating the terms of their merger in secret, members of the BCTG board kept Lewis informed of developments. In March, he told two personal assistants who were working on his yacht to buy shares in the company, predicting that its shares could double or even quadruple. They did so.
Shares in the company gained 14.5% on news of the merger.
Lawyers for Carter, Waugh and O’Connor declined to comment outside the courtroom.
