The SEC's complaint, filed in the US District Court for the Southern District of Florida [Images], charges Dr Zachariah, 58, a Fort Lauderdale, Florida-based cardiologist, and his brother, Dr Mammen P Zachariah, 60, also a cardiologist, with illegal trading in the shares of two unrelated companies.

The SEC alleges that Dr Zach Zachariah, a board member at pharmaceutical company IVAX Corporation, began illegally trading in IVAX securities only minutes after he learned that IVAX might be acquired by Teva Pharmaceuticals Industries, Ltd. He tipped off his brother, who then purchased IVAX shares.

The SEC's complaint further alleges that the two brothers and Dr Zach Zachariah's friend, Dr Sheldon Nassberg, 66, an endocrinologist, also engaged in illegal insider trading in the stock of an unrelated company, Correctional Services Corporation, around the same time as the illegal IVAX trading.

Linda Chatman Thomsen, director of the SEC's Division of Enforcement, said, 'The use of inside information to trade ahead of mergers and acquisitions undermines investors' faith in the integrity of our public markets. This action demonstrates that we will continue to vigorously pursue actions against those who engage in such misconduct.'

Glenn Stuart Gordon, associate regional director of the SEC's Miami [Images] Regional Office, added, 'Company shareholders are entitled to rely on directors not to abuse their access to inside information,' and noted that 'not only did Zachariah violate his duty as an IVAX director, he did in right on the heels of a round of insider trader in the stock of another company where he has connections.'

Thiruvananthapuram-born Dr Zach Zachariah, director of cardiology at the Holy Cross Hospital in Fort Lauderdale, has strongly denied the charges and even though he has the option to settle, has decided to fight the case, and if necessary, go to trial.

Bill White, a partner in the high-powered Washington, DC-based law firm WilmerHale LLP, which is representing Dr Zachariah, told rediff.com that "Dr Zachariah's position is clear -- he did not trade inside information and that is why he is fighting this case."

He said Dr Zachariah "did not receive a call from the CEO of IVAX" (Phillip Frost), as alleged by the SEC.

In its complaint, the SEC said that Frost had called Dr Zachariah from a private jet heading to London [Images] to alert him that Teva would likely acquire IVAX.

It states that within minutes of that call, even though IVAX was in a 'blackout' period during which the company forbade officers and directors to trade in IVAX stock, Dr Zachariah had placed the first of four separate IVAX stock purchase orders in his online brokerage account and purchased 35,000 shares of IVAX stock at a total cost of approximately $730,000.

The SEC further alleged that Dr Zachariah later unlawfully tipped his brother, who purchased 2,000 shares of IVAX stock at a total cost of approximately $46,000 on the last trading day before IVAX announced that Teva would aquire it.

According to the SEC, the Zachariah brothers and Nassberg, pocketed about $540,000 in illegal profits from the trading.

White said Dr Zachariah "has maintained throughout that he didn't receive a call," and noted that "the CEO of Ivax told his own general counsel that he did not tell him (Dr Zachariah) anything about the transaction."

"So we think that the SEC is just plain wrong," said White, who, interestingly, prior to joining WilmerHale, spent eight years on the staff of the SEC's enforcement division. During that time, he served as staff attorney, branch chief and senior trial counsel, and conducted investigations and litigated cases involving accounting and financial fraud, insider trading, municipal securities, broker-dealer and investment adviser violations and market manipulation.

Directing Dr Zachariah's defence is William R McLucas, also a partner at WilmerHale, and a former director of enforcement at the SEC, a position he served in for eight years, longer than any other enforcement division director in the SEC's history.

"Dr Zachariah," White said, "is really fighting because he didn't do it. He doesn't want to do something (settle the case) that would indicate that he is guilty of this."

"He didn't do it -- he is saying that throughout -- and we think there is a lot of evidence to support him and he does want to clear his name. That's the whole motivation for fighting this. It's really to clear his name, which before this is just an unblemished record and these charges impact his honour and his credibility and he doesn't want to let that sort of stay on his record unchallenged."

The SEC wants Dr Zachariah to turn over his profits on the trades and pay civil penalties. It also wants him banned from serving as an officer or board member or director of any publicly traded company in the future.

The Miami Herald newspaper, which first broke the story last week, quoted Michael Tein, a Miami securities and white-collar defence lawyer not involved in the case, as saying that federal prosecutors would have a difficult time winning a criminal securities fraud case against Dr Zachariah.

'Dr Zachariah is one of the most respected physicians and philanthropists in our community, and he has absolutely no criminal history,' Tein told the Herald.

The Herald also quoted Sharon Day, a Republican party stalwart in Florida, as saying that 'he's (Zachariah) been a big asset on the national fundraising side.'

'When he finds a candidate he believes in, he really gets behind him. He's also been a great supporter of the community. Go around Broward County and ask how many people owe their lives to him,' Day said.

Dr Zachariah been a regular invitee to the White House, President Bush's ranch in Crawford, Texas, and been on board Air Force One several times. Besides his close friendship with President Bush and his father, former President George H W Bush who has been to Dr Zachariah's home on several occasions, the cardiologist is also extremely close to erstwhile Florida governor Jeb Bush, the US president's younger brother.

As governor, Jeb Bush appointed Dr Zachariah -- who also runs his own clinic, the Fort Lauderdale Health Institute, with his brother Dr Mammen Zachariah -- chairman of the powerful Florida Board of Medicine, and then as a member of the Florida Board of Governors that overseeing the state university system.

After he exited as governor, Jeb Bush appointed Dr Zach Zachariah to the board of his educational think tank, the Foundation for Florida's Future.

In 2004, both former President George H W Bush and Jeb Bush were the keynote speakers at a fundraiser for President Bush's re-election at Dr Zachariah's home, which netted over $1.5 million. On that occasion, Jeb Bush noted, 'Bush supporters flock to Zach's house like migratory birds.'