Chairman of Health Care Company Sentenced for Involvement in Insider Trading Scheme

ule 10b5-1, according to the DOJ.Peizer avoided losses of nearly $12.5 million by entering into two Rule 10b5-1 trading plans while in possession of material nonpublic information concerning the serious risk that publicly traded health care company Ontrak Inc.’s then-largest customer would terminate its contract, court papers show.
The U.S. Attorney Bill Essayli emphasized the importance of maintaining integrity in the stock market, stating, “Insiders must not be allowed to put their thumbs on the scales of the stock market.” He reiterated that individuals who compromise the integrity of the markets will face consequences and potential prison time for their crimes.
Prosecutors highlighted the significance of the case as part of a larger initiative aimed at combatting executive abuses of 10b5-1 trading plans. While these plans can provide a defense against insider trading charges for executives, this defense is rendered invalid if the executive possesses material nonpublic information at the time of entering the plan. Furthermore, the DOJ clarified that a plan cannot protect an executive if it was not engaged in good faith or was part of an attempt to circumvent the rules of Rule 10b5-1.
During the 10-day trial in June 2024, a jury in downtown Los Angeles unanimously found Peizer guilty of one count of securities fraud and two counts of insider trading. Following the trial, U.S. District Judge Dale S. Fischer sentenced Peizer to three-and-a-half years in federal prison. In addition to the prison sentence, Peizer was ordered to pay a $5.2 million fine and $12.7 million in restitution.
Peizer, a resident of both Santa Monica and Puerto Rico, served as the chief executive and chairman of a Miami health care company. His actions in engaging in an insider trading scheme resulted in significant financial harm, with losses exceeding $12.5 million. By utilizing Rule 10b5-1 trading plans while in possession of material nonpublic information about risks facing Ontrak Inc., Peizer manipulated the system to avoid millions in losses.
The sentencing of Peizer highlights the serious consequences of engaging in insider trading schemes and the commitment of law enforcement to prosecute individuals who seek to manipulate financial markets for personal gain. As the DOJ continues its efforts to identify and address instances of executive abuses of trading plans, individuals are reminded of the legal and ethical obligations to uphold the integrity of the stock market.