LOS ANGELES — The former CEO and chairman of Ontrak, a publicly traded healthcare company based in Nevada, was found guilty Friday of millions of dollars in insider trading.
A federal jury in Los Angeles has convicted Terren Scott Peizer, a resident of Puerto Rico and Santa Monica, California, of one count of securities fraud and two counts of insider trading.
In a statement announcing the sentencing, the Justice Department described this as the first case it has prosecuted solely under what is known as Rule 10b5-1, which allows company insiders to devise a predetermined plan to acquire shares and at the same time impose restrictions on certain trading activities. practices.
Authorities said Peizer violated some of those limits when he laid out plans in 2021 to sell shares to avoid more than $12.5 million in losses after learning that Ontrak’s largest customer at the time was on the was about to terminate his contract with the company, which had just been established. outside Las Vegas.
After the news later became public, Ontrak’s stock price fell more than 44%, authorities said.
“This is the Department of Justice’s first insider trading prosecution based solely on the use of a trading scheme, but it will not be the last,” said Chief Deputy Assistant Attorney General Nicole M. Argentieri of the criminal division of the Ministry of Justice. Don’t let business leaders who trade on insider information hide behind trading plans they have drawn up in bad faith.”
One of Peizer’s attorneys, David Willingham, said in an emailed statement that they will appeal, and testimony at trial showed that Peizer did not act in bad faith because he relied on the advice of his management team when he drew up the trading plans.
“In our opinion, this outcome is a travesty of justice as Terren Peizer is innocent of these charges,” Willingham said. “We will not rest until it is destroyed.”
Peizer, 64, is expected to be sentenced in October. He stepped down as CEO last March after he was charged.
He faces up to 25 years in prison for securities fraud, and up to 20 years for each insider trading charge.