A sometime Santa Monica resident who was the chief executive and chairman of a Miami health care company was sentenced Monday to three-and-a-half years in federal prison for engaging in an insider trading scheme to avoid losses of more than $12.5 million.
Terren Scott Peizer, 65, also a resident of Puerto Rico, was sentenced by U.S. District Judge Dale S. Fischer, who also ordered him to pay a $5.2 million fine and $12.7 million in restitution, according to the U.S. Department of Justice.
At the conclusion of a 10-day trial in June 2024, a jury in downtown Los Angeles found Peizer guilty of one count of securities fraud and two counts of insider trading.
Federal prosecutors said the case is part of a data-driven initiative led by the DOJ’s fraud section to identify executive abuses of 10b5-1 trading plans. Such trading plans can offer an executive a defense to insider trading charges. However, the defense is unavailable if the executive is in possession of material nonpublic information at the time he or she enters into the plan, the DOJ said.
Additionally, a plan does not protect an executive if the trading plan was not entered into in good faith or was entered into as part of an effort or scheme to evade the prohibitions of Rule 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.
“Insiders must not be allowed to put their thumbs on the scales of the stock market,” U.S. Attorney Bill Essayli said in a statement. “Individuals who impugn the integrity of our markets can and will face prison time for their crimes.”