Chip Skowron

Joseph F. "Chip" Skowron III (c. 1968)

He then attended and graduated from Yale University Medical School in 1998 with a medical degree, and from Yale Graduate School with a doctorate in cellular biology. He published a number of medical papers, including "Cloning and characterization of mouse brush border myosin-I in adult and embryonic intestine."

Skowron resides in Greenwich, Connecticut. He has a wife, Cheryl, and two daughters and two sons.

Hedge fund career After leaving his residency Skowron worked as a healthcare analyst at SAC Capital Management in Stamford, Connecticut, and then at Millennium Partners in New York, for less than one year at each.

Skowron then became a hedge fund co-portfolio manager of Greenwich, Connecticut-based FrontPoint Partners LLC's health care funds. He was paid in part based on the performance of the funds he managed, earning $13.5 million in 2007 and $7 million in 2008.

According to the government, Skowron sold shares of Human Genome Sciences Inc. in 2007 and 2008 after being tipped off by a consultant to the company that the company was about to make a negative announcement regarding its clinical trial for the drug Albumin Interferon Alfa 2-a, a potential drug to treat hepatitis-C, before the announcement was made. As a result, FrontPoint's hedge funds were able to avoid $30 million in losses, according to the government.

At first Skowron denied the charges against him, and his defense attorney said he would plead not guilty, saying "We look forward to responding to the allegations more fully in court at the appropriate time". However, after the doctor charged with tipping him off pleaded guilty, he changed his position, and admitted his guilt. The consultant agreed to plead guilty to a four-count criminal information, and agreed to cooperate with the government's investigation. Preet Bharara, U.S. Attorney for the Southern District of New York, said: "Chip Skowron is the latest example of a portfolio manager willing to pay for proprietary, non-public information that gave him an illegal trading edge over the average investor. The integrity of our market is damaged by people who engage in insider trading...." Skowron's wife asked the judge to be lenient with him, saying her husband didn't realize he was doing anything that could result in him going to prison. Skowron also agreed to forfeit $5 million to the government and pay a $2.7 million SEC penalty.

Skowron, sentenced in November 2011 by Judge Denise Cote to, and served, five years in federal prison at medium-security Schuylkill Federal Prison Camp in Minersville, Pennsylvania. He was released in 2017, subject to three years of supervised release. He was prohibited from working in the securities industry. The FrontPoint Healthcare Funds were named solely as relief defendants, and agreed to make a disgorgement payment with prejudgment interest to the SEC for the alleged losses avoided, and paid the SEC $33 million in an enforcement action.

Faithless servant lawsuit Morgan Stanley filed a separate civil lawsuit in October 2012 seeking the $33 million it paid the SEC, as well as the entire $32 million it had paid Skowron in compensation from 2007 to 2010. In its lawsuit, Morgan Stanley called Skowron a “faithless servant” who lied repeatedly to continue being paid by Morgan Stanley and to avoid a blow to his reputation. The judge applied the legal doctrine of "faithless servant" to require Skowron to return his ill-gotten gains from the use of inside information to his employer, because he had engaged in insider trading, in violation of the firm's code of ethics, and failed to report his insider trading to the company. The judge said that insider trading was "the ultimate abuse of a portfolio manager's position."