Former CFO of drugmaker Aceto going to prison for insider trading
Aceto Corp. headquarters in Port Washington is shown in 2011. Credit: Barry Sloan
The former longtime chief financial officer of drugmaker Aceto Corp. in Port Washington has been sentenced to six months in prison for insider trading.
Douglas Roth, 64, will begin serving the sentence next month at the Federal Correctional Institution in upstate Otisville, according to an order by U.S. District Court Judge Joan M. Azrack in Central Islip.
After being released from prison, Roth will be confined to his East Northport home for six months. He also must pay a $150,000 fine.
Roth has already forfeited the $147,803 that he avoided losing by selling his Aceto shares in early April 2018, two weeks before the company publicly disclosed it was in financial trouble and the stock plummeted in value.
The prison sentence is less than the 12 to 18 months that Mark Lesko, then-Acting U.S. Attorney for the Eastern District of New York had requested but more than the probation Roth asked for.
"We were, of course, disappointed that the judge determined a jail sentence was appropriate and were hopeful to the end that [Roth's] sentencing would result in a different outcome," Roth's attorney Kenneth Abell said on Tuesday. "But, consistent with his approach throughout this case, Doug accepts and respects the judge’s decision and is prepared to report to jail next month."
In a letter to the judge before his sentencing, Roth wrote, "I committed a crime by trading stock with knowledge of material non-public information. I used bad judgment. I have taken full responsibility for my actions" by pleading guilty in November 2020.
Roth wrote that probation would permit him to continue to care for his only grandchild, who was born prematurely last year, and to undergo treatment for prostate cancer.
Prosecutors, responding to Roth’s request, said he had been Aceto’s CFO for 17 years and "given the seriousness of the conduct here, a sentence of probation is not sufficient to provide just punishment, to promote respect for the law and effect adequate deterrence."
Roth sold 69,549 shares of his Aceto stock on April 3 and 4, 2018, after retiring on March 31, 2018. He sold the stock for $7.04 and $7.08 per share, respectively, according to prosecutors.
The transactions occurred before Aceto’s April 18, 2018 news release, which stated the company’s finances had deteriorated, that it would likely break promises made to lenders and might write down more than $100 million in goodwill assets. Roth told the judge that he only had prior knowledge of some of the information in the news release. Aceto shares closed at $2.66 on the news.
"Upon his retirement, Doug was advised by his financial adviser that he should diversify his portfolio," Roth’s attorney wrote in a memo to the judge. "That was the impetus for Doug’s sale of stock."
Less than a year after Roth’s stock sales, Aceto filed for bankruptcy protection from its creditors, citing massive debt and mounting losses from its Rising Pharmaceuticals division. In two auctions supervised by the U.S. Bankruptcy Court in 2019, Aceto’s assets were sold for $437 million.
A successor company, also called Aceto, remains in Port Washington and sells chemicals used in agriculture and industry.
James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.
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