A former top executive of drugmaker Aceto Corp. in Port Washington has pleaded guilty to insider trading for selling his stock before the company publicly disclosed it was in financial trouble, federal prosecutors said Monday.
Douglas Roth, 63, avoided losses of more than $145,000 by selling 69,549 shares of Aceto stock in early April 2018 for $489,891. The transactions occurred two weeks in advance of the company’s news release stating its finances had deteriorated, according to a court filing.
Prosecutors said the East Northport resident sold his Aceto shares in two batches on April 3 and 4 for $7.04 and $7.08, respectively. On April 19, 2018, Aceto shares closed at $2.66 on the Nasdaq market after the company announced a day before that it would likely break promises made to lenders and might write down more than $100 million in goodwill assets.
As Aceto’s chief financial officer and later a consultant, Roth knew about the problems stemming from lower profits from the sale of generic drugs and debt amassed for the purchase of Rising Pharmaceuticals Inc. in New Jersey, the filing stated.
Roth made his guilty plea before U.S District Court Judge Joan M. Azrack in Central Islip. He faces up to 20 years in prison, forfeiture and a fine of up to $5 million.
Roth couldn’t immediately be reached for comment Monday.
One of his attorneys, Andrew T. Garbarino, said: "Doug Roth took full responsibility today for an isolated trade that he made shortly after he retired from his longtime employer, Aceto. This conduct was an aberration from an otherwise admirable, law-abiding life. But consistent with Doug’s character, he has accepted responsibility for his actions and hopes to present a full picture of his life at sentencing."
Roth sold his Aceto shares days after retiring as CFO and becoming a financial consultant to the 72-year-old company. He joined Aceto in 2001 as chief financial officer and added the titles of senior vice president and chief administrative officer in 2010.
Acting U.S. Attorney Seth D. DuCharme said on Monday: "Corporate officers cannot use their positions of trust for personal benefit at the expense of shareholders. He said prosecutors "will vigorously prosecute those who abuse their positions to defraud the financial markets."
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 last year, Aceto’s assets were sold for $437 million, with Rising only fetching $15 million.
A successor company, also called Aceto, remains in Port Washington and sells chemicals used in agriculture and industry.