Defendant Avoided Losses by Selling Company Stock Prior to Announcement of Negative Financial News
Earlier today, at the federal courthouse in Central Islip, Douglas Roth, the former Chief Financial Officer (CFO) of Aceto Corporation (Aceto), a pharmaceutical company based in Port Washington, New York, pleaded guilty to securities fraud for insider trading. Roth obtained material non-public information about Aceto’s financial condition while serving as the company’s CFO, then sold shares of Aceto ahead of a public announcement detailing negative information about the company’s finances and avoided more than $145,000 in losses. Today’s proceeding took place before United States District Judge Joan M. Azrack. When sentenced, Roth faces up to 20 years in prison, as well as forfeiture and a fine of up to $5 million.
Seth D. DuCharme, Acting United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the guilty plea.
“Corporate officers cannot use their positions of trust for personal benefit at the expense of shareholders,” stated Acting United States Attorney Seth D. DuCharme. “As demonstrated by today’s guilty plea, this Office will vigorously prosecute those who abuse their positions to defraud the financial markets.” Mr. DuCharme thanked the New York Regional Office of the Securities and Exchange Commission (SEC) for their cooperation and assistance during the investigation.
According to court filings and facts presented during the plea proceeding, Roth was CFO of Aceto from approximately May 2001 to March 31, 2018. During the relevant time period, shares of Aceto traded on the NASDAQ exchange under the ticker ACETQ. Between January and March 2018, Roth was aware of non-public information that Aceto’s financial performance had worsened substantially as compared to its most-recent publicly-released financial statements, including that Aceto was likely to breach certain financial covenants it owed to its bank lenders, and that Aceto might need to write down more than $100 million in goodwill assets. While in possession of that non-public information, Roth sold approximately 69,549 shares of Aceto stock. Shortly thereafter, Aceto issued a press release publicly announcing that its financial condition had worsened, that it had breached certain financial covenants and that it would need to write down significant goodwill assets, after which Aceto’s share price dropped significantly. By selling his shares before the press release was issued, Roth avoided more than $145,000 in losses.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Alixandra E. Smith and Mathew S. Miller are in charge of the prosecution.
East Northport, New York
E.D.N.Y. Docket No. 20-481 (JMA)