Pfizer Director Whose Stock Sold Ahead of Wyeth Merger: "I Sometimes Know Too Much''
What are we to make of the Bloomberg report that Pfizer director James Kilts sold $259,772 of his shares in the company around the same time Pfizer began negotations to acquire Wyeth? In acquisitions, the buying company's stock usually declines because its cash is being spent on the selling company's stock. Thus, Kilts appears to have sold 86 percent of his Pfizer stock at precisely the point where the price was about to decline -- but before the news was public. Pfizer is now trading at $14.58; Kilts' sales were made back when it was above $18.
When an insider trades on non-public news, this is called insider trading and is illegal. You can go to jail for this sort of thing.
Kilts said in his SEC filing -- which he only made in February, after the deal, even though the shares were sold last June -- that he did not know his portfolio manager had made the trades. Here's his full statement to the SEC:
1. The sales transactions reported on this Form 4 were executed by Mr. Kilts' portfolio manager without Mr. Kilts' knowledge or approval and contrary to Mr. Kilts' instructions to the portfolio manager not to trade in Pfizer securities without his prior approval. Mr. Kilts became aware of the transactions in February 2009. 2. The reporting person disclaims beneficial ownership of the shares held by such trust.It's worth pointing out that the stock sold was held in a trust (meaning the sales legally benefitted someone else). It doesn't say who the trust was for, although just under $10,000 of the shares were held "By Trust for Spouse," according to the filing. Pfizer spokesman Ray Kerins told Bloomberg:
"Contrary to the direction of Jim Kilts' explicit instructions not to engage in any transaction in Pfizer stock without his prior approval, Jim Kilts' portfolio manager sold shares of Pfizer in early June 2008."The two statements are fascinating because they both imply that Kilts employed the stupidest fund manager on the planet: The client is a Pfizer director who gives plain English instructions not to sell Pfizer stock -- but as soon as the company gets into merger talks, the manager, by pure coincidence, jettisons the stock.
How unfortunate is this? (Well, considering how many smart people were duped by Bernie Madoff, the odds are smaller than you'd think.) This is Jim Kilts we're talking about here. He's a founder of Centerview Partners, the private equity and investment bank firm. He's also the former CEO of Gillette, who sold that company to Procter & Gamble and netted himself a $153 million payday in the deal.
So Kilts is a sophisticated man, who presumably employs sophisticated people to manage his family's trusts. But in this case, Pfizer says, Kilts and his people screwed up.
Note that Kilts was doubly unlucky, because there's also the question of why the sale report was not made until February, when it occured eight months earlier. After disobeying his instructions, did Kilts' manager not provide him with timely reports on changes in his trusts? Not even a quarterly statement? Or maybe Kilts doesn't read them. Who knows.
Kilts has a complicated financial life. In addition to his PE fund/bank and his Pfizer board seat, he was also on the board of the New York Times until 2007. Here's his resume. This is a guy whose entire life is spent talking to people who are CEOs or board members.
"I don't go to their meetings," he said of Centerview's bankers. With so many chief executives as friends, he said, "I sometimes know too much."Except, apparently, in this case.