A federal judge on Tuesday ordered ex-FrontPoint Partners hedge fund manager Joseph “Chip” Skowron, who is serving a five-year prison sentence for insider trading, to repay $10.2 million to his former employer Morgan Stanley.
Doctor-turned-stock picker Skowron pleaded guilty in August to trading stock of Human Genome Sciences Inc. in 2008 based on non-public information he admitted to having received from a consultant for the biotech company, who also pleaded guilty to insider trading charges. Skowron was sentenced to five years in prison and ordered to forfeit $5 million.
Morgan Stanley – which acquired FrontPoint in 2006 – had sought nearly $45 million from Skowron as a victim of his fraud. That amount included the $33 million Morgan Stanley paid to the Securities and Exchange Commission to settle claims against FrontPoint stemming from the insider trading scheme.
U.S. District Judge Denise Cote ruled Tuesday that Morgan Stanley was not entitled to recoup the $33 million SEC payment under a law allowing victims to recoup financial losses from fraud. However, she did order Skowron to pay the full $3.8 million in legal fees Morgan Stanley incurred as a result of Skowron’s actions.