Two doctors fined, another to trial in top Republican fundraiser’s insider trading case

Zachariah Zachariah

Mammen Zachariah

By Dan Christensen, browardbulldog.org

The former chairman of the Florida Board of Medicine and another Fort Lauderdale physician have agreed to pay substantial sums to settle federal civil charges of insider stock trading.

Zach Zachariah, who has raised millions of dollars for Republican causes and candidates – including both Presidents Bush, faces similar charges, but has declined to settle his case.  A federal magistrate has set trial for Aug. 23, 2010.

Without admitting or denying the government’s allegations, Mammen Zachariah, 61, agreed to cough up nearly $136,000 in what a judge labeled “ill-gotten gains,” plus an equal amount as a civil penalty. The total: $279,600.

Nassberg, an endocrinologist, agreed to similar disgorgement and penalty payments totaling $52,668. He admitted no wrongdoing. Both men are required to pay up by the end of the month.

The final judgments signed by U.S. Magistrate Linnea Johnson on Wednesday also include permanent injunctions that restrain both doctors from future securities law violations.

Zach Zachariah, another past chairman of the Florida Board of Medicine, is alleged to have used nonpublic information to buy and sell shares of two unrelated Florida companies, Miami-based generic drug maker IVAX and Sarasota’s Correctional Services Corp. (CSC).

Zachariah was on IVAX’s board of directors in July 2005 when company Chairman Phil Frost informed him that IVAX had agreed to be acquired by Teva Pharmaceuticals for $26 a share. Within minutes, Zachariah bought 35,000 IVAX shares for about $21 a share, the SEC said. At the time of the alleged purchase, company insiders were forbidden from trading in IVAX’s stock. 

Zachariah also allegedly tipped his brother, who bought 2,000 IVAX shares for about $23 a share on the last trading day before the deal was announced in July 25.

Zachariah allegedly used inside information to make even more money trading shares of CSC, which was acquired by The GEO Group of Boca Raton in 2005. According to the SEC, the Zachariah brothers and Nassberg turned $380,000 in quick profits.

The government says Zachariah acquired that inside knowledge in a couple of ways. One was through his son Zachariah “Reggie” Zachariah, who worked in GEO’s mergers and acquisitions department. Reggie Zachariah has denied under oath tipping his father to the deal.

Another was through Zachariah’s own moonlighting work for GEO. The SEC says Zachariah made “millions of dollars” as a corporate consultant, service provider and lobbyist for GEO – a giant prison contractor once known as Wackenhut Corrections.

Zachariah, who owns a $2.3 million home on the Intracoastal Waterway in secluded Sea Ranch Lakes, said under oath last winter that he was paid to provide access for GEO chief executive George Zoley to top federal and state Republican politicians.

Those politicians include former President George W. Bush, former Senate Majority Leader Bill Frist, former Florida Senate President Tom Lee and House Speaker Alan Bense and former attorney general Charlie Crist, now Florida’s governor.