FILED IN CHAMBERS v.

Case 3:14-cr-00022-UNA Document 1 Filed 12/02/14 Page 1 of 9
FILED IN CHAMBERS
U.S.D.C. Atlanta
DEC 0 2 2014
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA By:
NEWNAN DIVISION
I'l.
Hl-i--; 1:.:'\,
UNITED STATES OF AMERICA
v.
Criminal Indictment
THOMAS D. MELVIN,
C. ROAN BERRY,
MICHAEL S. CAIN, AND
JOEL C. JINKS
THE GRAND JURY CHARGES THAT:
COUNTS ONE through SEVEN
Securities Fraud (18 U.S.C. §§ 1348 and 2)
1. From on or about December 4,2009, and continuing through on or about
January 14,2010, in the Northern District of Georgia and elsewhere, Defendants
THOMAS D. MELVIN, C. ROAN BERRY, MICHAEL S. CAIN, and JOEL C.
JINKS, and PERSON A, aided and abetted by each other, did knowingly and
willfully execute and attempt to execute a scheme and artifice (1) to defraud
other persons in connection with stock securities of Chattem, Inc. and (2) to
obtain, by means of false and fraudulent pretenses, representations, and
promises, money and property in connection with the purchase and sale of stock
securities of Chattem, Inc., an issuer with a class of securities registered under
Section 12 of the Securities Exchange Act of 1934 ("the Exchange Act") (15 U.s.C.
Case 3:14-cr-00022-UNA Document 1 Filed 12/02/14 Page 2 of 9
§ 781) and that was required to file reports under Section 15(d) of the Exchange
Act.
BACKGROUND
2. At all times relevant to this Indictment:
a. Chattem, Inc. ("Chattem") was an over-the-counter pharmaceutical
manufacturer headquartered in Chattanooga, Tennessee. Chattem was a public
company whose stock traded on the NASDAQ Stock Market ("NASDAQ")
under the ticker symbol"CHTT." Chattem's securities were registered with the
United States Securities and Exchange Commission ("SEC") pursuant to Section
12(b) of the Exchange Act, and the Company was required to file reports with the
SEC pursuant to Section 15(d) of the Exchange Act.
b. Sanofi-Aventis ("Sanofi") was a French pharmaceutical company
that manufactured and marketed prescription and over-the-counter medication.
Sanofi traded American depository shares on the New York Stock Exchange
under the symbol "SNY."
c. In or about late 2009, Chattem entered discussions with Sanofi
regarding a potential acquisition of Chattem. In or about November 2009,
Chattem had a series of confidential board of directors meetings in which
Sanofi's proposed acquisition of Chattem at a price of above $90 per share was
discussed, and Chattem agreed to proceed with due diligence. The directors who
served on Chattem's board had an obligation to maintain the confidentiality of
information received in connection with their service as directors.
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d. Defendant THOMAS D. MELVIN was a certified public accountant
licensed in Georgia and partner in the accounting firm Melvin, Rooks, & Howell
("MRH") in Griffin, Georgia. In his capacity as an accountant, MELVIN regularly
received confidential information from clients. The Georgia State Board of
Accountancy prohibits licensees from disclosing confidential information
obtained in the course of performing professional services without client consent.
e. One of MELVIN's clients was a board member of Chattem who was
present in the Novernber 2009 board meetings in which Sanofi's proposed
acquisition was discussed.
f. On or about December 4, 2009, MELVIN met with the board
member, during which the board member provided confidential information
about the merger, including the approximate timing of the deal and information
from which the likely acquisition price was apparent, to MELVIN for purposes of
obtaining personal tax advice. The board member told NIELVIN that the
information discussed during their meeting was confidential.
g. On December 21, 2009, Sanofi publicly announced that it was
acquiring Chattem in a $1.9 billion cash deal. Chattem's stock rose from $69.98
per share at closing on December 20, 2009, to $93.50 per share. at closing the next
day, which was approximately a 33% increase.
h. MELVIN served as the personal accountant for Defendants C.
ROAN BERRY, NnCHAEL S. CAIN, and JOEL C. JINKS.
i. Defendant BERRY lived in Griffin, Georgia and owned a small
business, E.E.S.I. MELVIN served as BERRY's accountant for both personal tax
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services and accounting services for E.E.S.I., and BERRY and MELVIN
maintained a close personal friendship. Defendant BERRY maintained a
brokerage account at Wells Fargo Advisors, LLC ("Wells Fargo") in the name of
his company, E.E.S.I.
j. Defendant CAIN lived in Griffin, Georgia and was a senior vice
president at Morgan Stanley Smith Barney ("Morgan Stanley"). In connection
with his duties at Morgan Stanley, CAIN was a securities broker who traded
securities on behalf of clients and on his own behalf. MELVIN served as CAIN's
accountant for personal tax services, CAIN and MELVIN referred clients to each
other, and CAIN managed MRH's retirement accounts. Defendant CAIN
maintained a brokerage account for personal securities trading at Morgan
Stanley Smith Barney ("Morgan Stanley") in his own name.
k. Defendant JINKS lived in Griffin, Georgia and was a small business
owner. MELVIN served as JINKS's accountant for both personal tax services and
for JINKS's business, and JINKS and MELVIN maintained a close personal
friendship. On or about November 20, 2009, Defendant JINKS opened a
brokerage account at Wells Fargo in his own name and in his wife's name.
1. PERSON A worked at the accounting firm MRH in Griffin, Georgia
with Defendant MELVIN. PERSON A's father-in-law maintained a brokerage
account for personal securities trading at Pershing, LLC, in his own name and in
the name of a family member.
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DEFENDANTS' SCHEME TO DEFRAUD
3. MELVIN misappropriated material, nonpublic information ("Inside
Information") regarding Sanofi's planned acquisition of Chattem in advance of
the public merger announcement in violation of (1) the duties of trust and
confidence that licensed accountants owe to clients under the Georgia State
Board of Accountancy Code of Professional Conduct, (2) expectations of
confidentiality held by his client, and (3) his client's express request that the
Inside Information shared with MELVIN remain confidentiaL
4. MELVIN disclosed the Inside Information to BERRY, CAIN, JINKS, and
PERSON A for his own personal benefit and in violation of duties of trust and
confidence, with the understanding that the Inside Information would be used
for the purpose of purchasing or selling securities.
5. Defendants BERRY, CAIN, and JINKS, and PERSON A, aided and abetted
by Defendant MELVIN, carried out the scheme and artifice to defraud by
misappropriating Inside Information of Chattem's, knowing that it had been
disclosed by MELVIN in violation of duties of trust and confidence that NIELVIN
owed to his clients, so that BERRY, CAIN, JINKS, and PERSON A could execute
and cause the execution of securities transactions on the basis of the Inside
Information.
6. Defendants BERRY, CAIN, and JINKS, and PERSON A, in tum executed
and caused to execute transactions in Chattem's securities on the basis of the
Inside Information provided by Defendant MELVIN for their own benefit
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through personal online brokerage accounts. Defendants BERRY, CAIN, and
JINKS, and PERSON A, sold their Chattem shares after the merger was publicly
announced, thereby earning illegal profits.
EXECUTION OF DEFENDANTS' SCHEME TO DEFRAUD
7. On or about December 4,2009, shortly after his client meeting with the
Chattem board member, MELVIN called Defendants BERRY, CAIN, and JINKS
within an hour of each other. MELVIN exchanged multiple calls with Defendants
BERRY, CAIN, and JINKS between on or about December 4, 2009 and on or
about December 21, 2009, the day that Sanofi's acquisition of Chattem was
publicly announced. Following the initial conversations with MELVIN,
Defendants BERRY, CAIN, and JINKS purchased Chattem stock.
8. On or about December 7, 2009, MELVIN told PERSON A that a client gave
him Inside Information about the potential acquisition of Chattem, including that
the merger would occur before the end of 2009 and that Chattem's stock would
rise approximately $20-25 per share. Following MELVIN's conversation with
him, PERSON A asked his father-in-law to purchase Chattem stock for him or on
his behalf.
9. On or about the dates identified in Column C of the chart set forth below,
each date constituting a separate count as set forth in Column A, in the Northern
District of Georgia and elsewhere, for the purpose of executing and attempting to
execute the aforementioned scheme and artifice to defraud, and to obtain money
and property by means of false and fraudulent pretenses, representations, and
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promises, the defendants identified in Column B, aided and abetted by each
other and others, executed and caused to execute the securities transactions set
forth in Column D on the basis of Inside Information that they obtained from
Defendant MELVIN:
A
Count
B
Defendants
ONE
MELVIN
I December 10, 2009
TWO
BERRY &
MELVIN
December 7, 2009
THREE
CAIN &
MELVIN
December 4, 2009
I FOUR
CAIN &
MELVIN
December 7, 2009
FIVE
CAIN &
MELVIN
December 11, 2009
SIX
CAIN &
MELVIN
December 15, 2009
SEVEN
JINKS &
December 11, 2009
I
C
Date
(On or About)
7
D
Transaction (Amount
A;Q;Qroximate)
Purchase of shares of Chattem
common stock in Pershing
LLC brokerage account for or
on behalf of PERSON A
Purchase of shares of Chattem
common stock in Wells Fargo
brokerage account in the name
of E.E.5J.
Purchase of shares of Chattem
common stock in Morgan
Stanley brokerage account in
CAIN's name
Purchase of shares of Chattem
common stock in Morgan
Stanley brokerage account in
CAIN's name
Purchase of shares of Chattem
common stock in Morgan
Stanley brokerage account in
CAIN's name
Purchase of shares of Chattem
common stock in Morgan
Stanley brokerage account in
CAIN's name
Purchase of shares of Chattem
I
!
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l
common stock in Wells Fargo I
brokerage account in JINKS's
name
MELVIN
All in violation of Title 18, United States Code, Sections 1348 and 2.
FORFEITURE PROVISION
Upon conviction of one or more of the offenses alleged in Counts One
through Seven of this Indictment, the defendants, NIELVIN, BERRY, CAIN, and
JINKS, shall forfeit to the United States pursuant to Title 18, United States Code,
Section 981(a)(1)(C) and Title 28, United States Code, Section 2461(c), any
property constituting or derived from proceeds obtained directly or indirectly as
a result of said violations.
If any of the above-described forfeitable property, as a result of any act or
omission of the defendant(s):
(a) cannot be located upon the exercise of due diligence;
(b) has been transferred or sold to, or deposited with, a third party;
(c) has been placed beyond the jurisdiction of the court;
(d) has been substantially diminished in value; or
(e) has been commingled with other property that cannot be divided without
difficul ty;
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Case 3:14-cr-00022-UNA Document 1 Filed 12/02/14 Page 9 of 9
it is the intent of the United States, pursuant to Title 21, United States Code,
Section 853(p) as incorporated by Title 18, United States Code, Section 982(b), to
seek forfeiture of any other property of said defendant(s) up to the value of the
forfeitable property described above.
A
SALL Y QlTILLIAN YATES
NATHAN P. KITCHENS
Assistant United States Attorney
Ge
No. 263930
v
DOUGLAS?GILFI
Assistant
States Attorney
Georgia Bar No. 294713
600 U.5. Courthouse
75 Spring Street, S.W.
Atlanta, GA 30303
404-581-6000; Fax: 404-581-6181
9
BILL

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