Overseeing a clinical trial certainly has its advantages - prestige, insight into new therapies and extra income. But having the freedom to tell a favored portfolio manager about the progress of the drug being studied is not one of the usual privileges. Somehow, Yves Benhamou decided to ignore this small point, and now he is under arrest and faces up to 25 years in prison for insider trading.

How did he screw up? Well, Benhamou, who is 50 years old and lives in the Paris suburb of Neuilly-sur-Seine, was a principal investigator and on the steering committee that was overseeing a trial for Albuferon, a hepatitis C drug being developed by Human Genome Sciences. However, he was also a paid consultant to a portfolio manager and various hedge funds and other investors. In fact, he was good friends with the portfolio manager and even asked him for investment advice, underscoring the frailty of the process for overseeing clinical trials.

The transgression began back in December 2007 and January 2008, according to this lawsuit filed by the US Securities and Exchange Commission, when Benhamou learned some damning news about the Albuferon trial that was not publicly available. Specifically, there were safety issues - two patients took seriouslly ill and died. This forced the drugmaker to move patients in its Phase 3 trial to a lower dose. Until then Albuferon was expected to become a huge seller, although the higher dose was expected to have much greater commercial potential.

And so in a series of phone calls January 2008, the good doctor tipped off his friend the portofolio manager, who sold off a chunk of Human Genome Sciences stock just before the announcement. In doing so, the hedge funds eventually sold off about 6 million shares avoided some $30 million in losses. How so? The day after dosage announcement was made, the stock fell 44 percent, to $5.62 from $10.02. There’s nothing like having a friend on a steering committee, is there?

Benhamou was arrested on Monday in Boston while attending a conference but arraigned in New York, and faces civil and criminal charges. We asked Cheryl Scarboro, associate director of the SEC Division of Enforcement, why the portfolio manager and hedge fund managers were not arrested, but she declined to comment. However, she did say the investigation is continuing. Various reports says the hedge fund involved in this mess is FrontPoint Partners and that a portfolio co-manager Chip Skowron is now on leave.