CHAPEL HILL — Four years ago, a judge dismissed a lawsuit that accused current mayoral candidate Matt Czajkowski of insider trading during his three years as chief financial officer at pharmaceutical company Pozen, headquartered in Chapel Hill.
Czajkowski sold 25,000 shares for $17 each on Sept.15, 2003, collecting $425,000 near the stock's peak value, according to court records.
CEO John Plachetka sold 250,000 shares that day for $4.25 million. Two other executives sold off another 80,000 shares for more than $1million from June to early October of that year.
On Oct. 20, 2003, the Food and Drug Administration rejected Pozen's application for migraine treatment MT 300. That day, investors sold off 2.3 million shares, and Pozen's stock price plummeted.
"Nobody knows what the FDA's going to do until they do it," Czajkowski said. "We had absolutely no inside information. ... It's virtually standard to fail in trying to get drugs approved."
Czajkowski owned nearly 200,000 shares at the time and still has some.
"If there was a shred of merit in the allegations, the SEC would have pursued those cases aggressively," the first-term Town Council member said. "If somehow my character and integrity are in question, it is sad indeed."
Some residents have questioned Czajkowski on his personal finances.
According to court records, the Securities and Exchange Commission did settle an insider-trading case with another former Pozen employee and his friend, both of whom allegedly sold stock on the day the FDA rejected another drug application but three days before Pozen announced the denial to the public on June 1, 2004.
The SEC has no record of any wrongdoing, but Czajkowski resigned from Pozen three months after the MT300 denial. Asked why, he pointed out that Plachetka remains at the company after selling 10 times as many shares on the same day.
"I don't think I need to explain my reasons for doing something in terms of my professional career," Czajkowski said. "It had nothing to do with [the stock sales]."
Shareholders sued Czajkowski and other Pozen executives in 2004, claiming they artificially inflated the stock price, but a judge dismissed the suit because the plaintiffs had not directly demanded any remedy from Pozen's board of directors as required by law in Delaware, where Pozen is incorporated.
"I have been utterly and completely exonerated of a charge which had no merit to begin with," Czajkowski said. "The judge threw it out. What more is there to be said?"
The plaintiffs failed to convince the court a direct demand would have been futile. The suit did not specifically allege what nonpublic information might have led the executives to sell their stock.
"You need to do that," said Larry Ribstein, a corporate law expert at the University of Illinois.
The timing of the sales may suggest the executives knew the FDA application might fail, but Ribstein said that such circumstantial evidence may not convince a court to let a lawsuit go forward.
In 2007, Pozen ended up settling five class-action lawsuits for $11.2 million, according to court records. The suits alleged, among other things, that executives knew of problems with MT 300 and manipulated the company's stock price to trigger large bonuses. Czajkowski received $306,000 in compensation in fiscal year 2003 but was not specifically named in those class-action suits.
The council member said his work at Pozen should help, not hurt, his campaign push for economic development in Chapel Hill.
Czajkowski is running for mayor against fellow Town Council member Mark Kleinschmidt and Augustus Cho, a member of the town's transportation and design review boards.
A fourth candidate, Kevin Wolff, announced two weeks ago that he was withdrawing from the race, but he had not notified the Orange County Board of Elections as of Tuesday.
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