A former executive at a Hawthorne-based company was found guilty Thursday of federal charges for trading in options contracts using inside information and illegally purchasing shares of a firm that his employer had targeted for acquisition.
Mark A. Loman, 60, of Hermosa Beach, was convicted by a Los Angeles federal court jury of four counts each of securities fraud and insider trading.
U.S. District Judge Dale S. Fischer scheduled a Jan. 10 sentencing hearing. Each securities fraud counts carries a sentence of up to 25 years in federal prison. The maximum sentence for each insider trading count is 20 years, according to the U.S. Attorney’s Office.
According to the evidence presented at his 10-day trial, Loman was vice president of finance and the corporate controller for OSI Systems Inc., a publicly traded security, health care and electronics manufacturing company, from 2006 until 2018. In those roles, Loman had advance knowledge of OSI’s revenue and earnings and, as corporate controller, was responsible for compiling and internally reporting the company’s confidential financial results, according to prosecutors.
Between October and December 2015, Loman received confidential information that OSI was financially underperforming and would fall far short of its earnings and revenue forecast for the second quarter of fiscal year 2016. Acting on that information in December 2015, Loman purchased a series of options contracts with the intent of profiting when OSI’s stock price fell, according to prosecutors.
On Jan. 27, 2016, OSI announced its disappointing second-quarter earnings, and lowered its sales and earnings guidance for the remainder of its fiscal year. On the day of the announcement, OSI shares plunged 30% in value from their previous closing day price. As a result, Loman gained about $355,000 in illegal profits from the scheme, according to the U.S. Attorney’s Office.
In March 2016, prosecutors say Loman misused nonpublic information by purchasing stock of American Science & Engineering Inc., a Billerica, Massachusetts-based manufacturer of security screening equipment that OSI had targeted for acquisition. Once OSI publicly announced in June 2016 its agreement to acquire AS&E, Loman immediately sold his shares in AS&E and made about $120,000 in illegal gains. In September 2016, OSI formally acquired AS&E for $270 million.
Loman made a total of about $475,000 in illicit gains through that scheme, according to federal prosecutors.
In July 2019, the Securities and Exchange Commission filed a lawsuit against Loman, charging him with insider trading. An April 2022 trial date is set.