The top executive of a health care treatment company has been charged with carrying out an insider trading scheme, the Securities and Exchange Commission announced.
Terren S. Piezer, Executive Chairman of California-based Ontrak, Inc., was accused of fraudulently using Rule 10b5-1 trading plans to trade the company’s stock between May and August 2021.
According to the SEC’s complaint, Peizer established a Rule 10b5-1 trading plan in the name of Acuitas Group Holdings, LLC, his investment vehicle, to sell Ontrak stock. At the time, he had learned that Ontrak’s relationship with its then-largest customer was tenuous but claimed he was unaware of any material nonpublic information about the company, the SEC said. He executed the Rule 10b5-1 plan and sold nearly 600,000 of Ontrak shares worth more than $19.2 million.
When he learned the same relationship with the customer was on the verge of ending several months later, Peizer reportedly adopted a second Rule 10b5-1 trading plan and sold 45,000 more shares of stock worth over $1.9 million. The complaint states that when Ontrak announced that the customer had terminated the contract, the company’s stock price fell over 44 percent and Peizer avoided over $12.7 million in trading losses.
Rule 10b5-1 allows insiders of publicly-traded corporations to set up a trading plan for selling stocks they own. But the SEC said Peizer cannot take advantage of any affirmative defense available to corporate insiders because he was aware of material nonpublic information and adopted the plans as part of a scheme to evade prohibitions on insider trading.
“We allege that Mr. Peizer, armed with inside knowledge, avoided millions in losses that ordinary investors suffered. That’s insider trading, even when the trading is done through a 10b5-1 trading plan,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “Few things undermine trust in the markets more than insiders abusing their positions for personal advantage.”
Peizer and Acuitas are charged with violating antifraud provisions of the federal securities laws. The SEC is seeking permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, civil penalties, and an officer and director bar for Peizer.
In a parallel action, the U.S. Department of Justice announced Peizer had been charged with one count of engaging in a securities fraud scheme and two counts of securities fraud for insider trading. If convicted, he faces a maximum penalty of 25 years in prison on the securities fraud scheme charge and 20 years on each of the insider trading charges.
The attorneys at Lewitas Hyman have decades of experience dealing with various types of securities fraud cases that can cause harm to investors. Our team includes lawyers who have worked for large financial institutions, including Morgan Stanley and UBS Financial Services, and regulatory bodies such as the SEC. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact our securities investment fraud lawyers at (844) 651-2643 or through our online contact form for a free consultation.