LOS ANGELES – An indictment was unsealed right now charging Terren S. Peizer, the CEO and Chairman of the Board of Administrators of Ontrak Inc., a Henderson, Nevada-based publicly traded well being care firm, for allegedly participating in an insider buying and selling scheme during which he fraudulently used Rule 10b5-1 buying and selling plans to commerce Ontrak inventory.
“Mr. Peizer is accused of utilizing his insider data as CEO of a publicly traded firm to line his personal pockets in violation of his obligation to his firm and its shareholders,” stated United States Legal professional Martin Estrada. “Mr. Peizer allegedly exploited materials nonpublic data and tried to defend himself with a rule designed to make sure a good and stage enjoying discipline for all buyers. With this indictment, we once more affirm that the legislation applies equally to all and that company executives who unlawfully denigrate the integrity of our monetary markets can be held accountable.”
In response to court docket paperwork, between Could and August 2021, Peizer, 63, a resident of Puerto Rico and Santa Monica, allegedly averted greater than $12.5 million in losses by getting into into two Rule 10b5-1 buying and selling plans whereas in possession of fabric, nonpublic data in regards to the critical threat that Ontrak’s then-largest buyer would terminate its contract. In Could 2021, Peizer allegedly entered into his first 10b5-1 buying and selling plan shortly after studying that the connection between Ontrak and the client was deteriorating and that the client had expressed critical reservations about persevering with its contract with Ontrak.
The indictment alleges that Peizer later realized that the client knowledgeable Ontrak of its intent to terminate the contract. Then, in August 2021, Peizer allegedly entered into his second 10b5-1 buying and selling plan roughly one hour after Ontrak’s chief negotiator for the contract confirmed to Peizer that the contract possible can be terminated.
In establishing his 10b5-1 plans, Peizer allegedly refused to interact in any “cooling-off” interval – the time between when he entered into the plan and when he offered inventory – regardless of warnings from two brokers. As a substitute, Peizer allegedly started promoting shares of Ontrak on the subsequent buying and selling day after establishing every plan. On Aug. 19, 2021, simply six days after Peizer adopted his August 10b5-1 plan, Ontrak introduced that the client had terminated its contract and Ontrak’s inventory value declined by greater than 44%.
“As we speak’s groundbreaking insider buying and selling indictment demonstrates that the Division of Justice, along with our legislation enforcement companions, won’t permit corrupt executives to misuse 10b5-1 plans as a defend for insider buying and selling,” stated Assistant Legal professional Normal Kenneth A. Well mannered, Jr. of the Justice Division’s Prison Division. “As this case exhibits, we now have embraced using knowledge to proactively establish and examine fraud as we proceed to make sure that atypical buyers are on an equal enjoying discipline with company insiders.”
“The FBI and our companions are dedicated to holding insiders accountable in any respect ranges, together with those that act in dangerous religion when establishing buying and selling plans so as to evade rules,” stated Assistant Director in Cost Donald Alway of the FBI Los Angeles Area Workplace. “People will need to have belief within the market and that may solely be achieved when offenders who violate their obligations are held accountable.”
Peizer is charged with one depend of participating in a securities fraud scheme and two counts of securities fraud for insider buying and selling. If convicted, he faces a most penalty of 25 years in jail on the securities fraud scheme cost and 20 years in jail on every of the insider buying and selling expenses.
The indictment represents the primary time that the Division of Justice has introduced felony insider buying and selling expenses stemming from an government’s use of a 10b5-1 buying and selling plan. The investigation is a part of a data-driven initiative led by the Fraud Part to establish government abuses of 10b5-1 buying and selling plans.
Rule 10b5-1 buying and selling plans can supply an government a protection to insider buying and selling expenses. Nonetheless, the protection is unavailable if the manager is in possession of fabric, nonpublic data on the time she or he enters into the 10b5-1 buying and selling plan. Moreover, a plan doesn’t shield an government if the buying and selling plan was not entered into in good religion or was entered into as a part of an effort or scheme to evade the prohibitions of Rule 10b5-1.
An indictment is merely an allegation. All defendants are presumed harmless till confirmed responsible past an inexpensive doubt in a court docket of legislation.
The FBI is investigating the case.
Assistant U.S. Legal professional Ali Moghaddas of the Main Frauds Part and Justice Division Trial Attorneys Matthew Reilly and Christina McGill of the Prison Division’s Fraud Part are prosecuting the case.
If you happen to imagine you’re a sufferer on this case, please contact the Fraud Part’s Sufferer Witness Unit toll-free at (888) 549-3945 or by electronic mail at victimassistance.fraud@usdoj.gov. For extra data and case occasion updates, please go to www.justice.gov/criminal-vns/case/united-states-v-terren-s-peizer.
