Complaints filed Tuesday by the Justice Department and the Securities and Exchange Commission detail how investigators at the Health and Human Services Department used security software to uncover an insider trading scheme orchestrated by a scientist at the Food and Drug Administration.

According to court documents, Cheng Yi Liang, a chemist since 1996 at FDA’s Office of New Drug Quality Assessment, exploited his access to the agency’s password protected internal tracking system for new drug applications to learn whether and when certain drug applications would be approved. Together with his son, he used the information to buy and trade drug stocks, reaping more than $2 million.

In early January, investigators with the HHS Office of the Inspector General installed software on Liang’s work computer and began collecting screen shots that tracked his activities. In one instance cited by Justice, the software revealed that on Jan. 18, he reviewed internal FDA documents recommending approval for the anti-depressant drug Viibryd, developed by the company Clinical Data Inc. The complaint alleges that “within minutes, several accounts controlled by Liang and his son purchased 4,875 shares of Clinical Data. Altogether, the defendants, through various accounts which they controlled, acquired 48,875 shares of Clinical Data before Viibryd’s approval was announced on Jan. 21, 2011, and subsequently sold their entire position for a profit of more than $379,000.”

In a statement, assistant attorney general Lanny Breuer said, “Our use of innovative investigative tools like the security software used in this case will provide an additional deterrent the next time someone sits in front of a computer and thinks about committing a crime.”

Source:http://techinsider.nextgov.com/2011/03/hidden_software_snagged_alleged_insider_trader.php?oref=latest_posts