Terren Scott Peizer, the former CEO and chairman of publicly traded health care company Ontrak, based in Nevada, was found guilty on Friday of participating in a multimillion-dollar insider trading scheme. He was convicted by a federal jury in Los Angeles on charges of securities fraud and insider trading. This case is notable as it is the first prosecuted by the Justice Department based on Rule 10b5-1, which allows company insiders to establish predetermined plans for selling shares with specific trading limits.
According to authorities, Peizer violated these limits when he set up plans in 2021 to sell shares in order to avoid over $12.5 million in losses after finding out that Ontrak’s largest customer was terminating their contract. Following the public disclosure of this news, Ontrak’s stock price plummeted by more than 44%. Deputy Assistant Attorney General Nicole M. Argentieri stated that this case serves as a warning to corporate executives who engage in insider trading, even if they use established trading plans.
Peizer’s defense team plans to appeal the conviction, arguing that Peizer had acted in good faith and had followed the advice of his management team. One of his lawyers, David Willingham, called the guilty verdict a travesty of justice and expressed their determination to have it overturned. Peizer, 64, is scheduled to be sentenced in October and could face up to 25 years in prison for securities fraud and up to 20 years for each count of insider trading.
The conviction of Terren Scott Peizer marks a significant step in the Justice Department’s efforts to crack down on insider trading by corporate executives. It sends a message that individuals who engage in fraudulent trading practices will be held accountable for their actions despite appeals process. If Peizer is found guilty again during appeals process he may face severe penalties including fines or imprisonment.