Former CEO sentenced to prison for stock trading in Milestone case

As detailed in various court documents, Peizer had sent increasingly desperate text messages to Conpontante and Ontrak executives about the potential losses of key clients in the months of planning a transaction to sell OnTrak shares.

Authorities said Peizer avoided a $12.5 million loss on the shares by selling the shares before certain information was made public and the share price fell by more than 40%.

The Miami-based company, founded in 2003 by Peizer, had previously lost another major client, but was identified in court documents. Etnawiped out $265 million of Peizer’s personal wealth after Ontrak’s stock price plummeted in the news.

March 2021 press release Announcing the end of Aetna, Peizer said the company still has a “significant tail” and promotes Ontrak’s contract with Cigna, driving growth in 2021, according to the Securities and Exchange Commission. Civil Complaint About Peizer trading.

Peizer resigned from his CEO role in April 2021, but remained as executive chairman.

After losing Aetna, Peizer appears desperate to maintain the similarity of his deal with Cigna, and as executive committee chair he continued to regularly communicate with Ontrak’s CEO on Text, court records show.

Behind the scenes, Paiser explained in a text message that he was “fixed” himself to a potential loss of “fixed” SignaOntrak’s survival rates are heavily dependent on maintaining relationships, authorities said.

David K. Willingham, a Peizer lawyer and partner at the law firm King & Spalding, is luck This incident was “a true miscarriage of justice from the beginning.” Peizer “full disclosure” of the transaction plan to his company in advance, and he said he had previously obtained approval from the management and compliance officer.

“This procedure and those trading plans were to protect Mr. Paser,” Willingham said. “In our view, this case is a massive overdue, a waste of taxpayer dollars, and sets a dangerous precedent that seriously distorts the meaning of material, private information across the business world.”

Willingham said the case would be appealed. Either way, it can have a calm effect Thousands of US executives Use the plan in Rule 10B5-1 to monetize stock compensation, which often makes up a large portion of the stock.

Meanwhile, authorities supported the prosecutors.

“Insiders should not be allowed to give thumbs up on the size of the stock market,” said Bill Essay, a lawyer for the Central District of California at DOJ. statement. “Individuals who have imposed the integrity of our market can face prison time for crime.”

Text trail

In late March 2021, Paiser learned via text message that he had a lot of concern about Cygna. Emails with a copy of Peizer have also been set to the scope of the issue. Cigna worried about budget overruns and lack of cost savings, and questioned Ontrak’s cost calculations.

Court documents show Peizer’s concern over the situation unfolded in his text message. He told an on-track consultant, “We just need to save, and we’re on the way.” A few weeks later, Peizer texted Ontrak’s CEO.

By the end of April, Paiser told the consultant that the situation with Signa felt “esquely” like Etna’s situation. “What a nightmare,” Peaser texted her on May 1, 2021.

Three days later, Peizer began considering how to sell Ontrak Holdings, court documents show.

Rule 10B5-1 Plan It is intended to provide Safe Harbor For executives who want to Sell ​​stocks In the securities of the publicly traded companies they work for, and who is paid fairly? The SEC revised the rules in 2022 to formalize the cooling-up period and add the condition that everyone who enters Rule 10B5-1 plan must act in good faith in the plan.

According to authorities, Peizer contacted the broker and set up a Rule 10B5-1 trading plan on May 4, 2021, a few days after his “What a Nightmare” text. The broker told Peizer he would need to wait 30 days for a cooling-up period before setting up a plan and then starting stock sales. Peizer has balked together with the broker.

Instead, he contacted another broker and asked if their company had a cooldown period. The second broker didn’t need one, but it was “industry best practice” to send an email to Peizer on May 10th, inserting a 30-day wait between the execution of the transaction plan and the start of the transaction. Without a cooling-off period, the rapid onset of the transaction could create a fraudulent appearance and raise doubts about whether Peizer has material private information, the employee emailed.

Peizer received no advice and established his trading plan on the same day. He began selling the next business day. Authorities alleged that Peizer had obtained the approved 10B5-1 plan by falsely proving to Ontrak’s Chief Financial Officer that the plan was not a result of access to material, private information, despite Peizer’s knowledge of Cigna’s collapse.

On May 18, just eight days after Peizer set up a trading plan, Cigna officially informed Ontrak that it would end its contract by the end of the year.

Ontrak CEO Text Peizer, “(Cigna) is going to end the relationship at the end of 12-31-21. They are really solid with me. The decision has been made.”

Meanwhile, the information was not made public.

Peizer sold shares over the summer under a plan established in May as OnTrak executives tried to revive their deal with Cigna. Between May and late July, authorities said Peizer had made $18.9 million from selling shares.

On July 20, 2021, Peizer texted the Ontrak consultant and asked if there were any words about the deal with Cigna.

The consultant wrote back that there was no news and that he needed to write an OnTrak revenue press release. “(w) The fun never ends?” the consultant wrote.

“No, but I hope there is some anxiety,” Paiser wrote back. The consultant texted, “I too- My stress level is off the charts (Ontrak).”

On August 13, 2021, Peizer called on Ontrak’s senior vice president to lead contract negotiations, authorities said. SVP told Peizer that Cigna is likely to end its relationship with Ontrak.

On the same day, about an hour after the call, authorities said Peizer had set up a second Rule 10B5-1 trading plan, claiming that he had again falsely identified with the CFO that the plan had not responded to material non-public information. There was no cooling-off period either in the August plan, and Peizer began selling Ontrak stock the following trading day, increasing the number of shares sold daily from 11,000 to 15,000. From August 16th to August 18th, Peizer sold approximately $900,000 in stocks sold.

It was not until the next day that the first public disclosure about Cigna appeared.

On August 19, 2021, Ontrack submitted its 8-K form that its deal with the insurance company had ended. Ontrak’s stock price fell 44%, court records show.

Officials alleged that Peizer avoided a $12.5 million loss because it set up two trading plans. The case is part of a data-driven initiative by the DOJ’s Criminal Fraud Division, identifying enforcement abuse of the 10B5-1 trading plan.

In addition to his prison sentence, Peizer was fined $5.25 million and had to confiscate unfair profits of more than $12.7 million.

Aetna declined to comment. Cigna did not immediately respond to requests for comment.