Former California Exec Sentenced To Prison For Insider Trading, Securities Fraud – InsuranceNewsNet

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November 30, 2021 Regulation News No comments
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Former California Exec Sentenced To Prison For Insider Trading, Securities Fraud

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A former executive at a Hawthorne-based company was sentenced today to 35 months in federal prison for trading in options contracts using inside company information and illegally purchasing shares of a company his employer had targeted for acquisition.

Mark A. Loman, 60, of Hermosa Beach, was sentenced by United States District Judge Dale S. Fischer, who said Loman had "betrayed his employer and the market" and had been motivated by greed. Judge Fisher also ordered Loman to pay a $600,000 fine.

At the conclusion of a 10-day trial, a jury on September 2 found Loman guilty of four counts of securities fraud and four counts of insider trading.

Loman was a 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 these 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.

In December 2015, Loman received confidential information that OSI was financially underperforming and would fall far short of its earnings and revenue forecast for its second quarter of its fiscal year 2016. Acting on this information in December 2015, Loman purchased a series of options contracts with the intent of profiting when OSI's stock price fell.

On January 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 this announcement, OSI shares plunged approximately 30 percent in value from their previous closing day price. As a result, Loman gained approximately $355,000 in illegal profits from this scheme.

In March 2016, 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 approximately $120,000 in illegal gains. In September 2016, OSI formally acquired AS&E for approximately $270 million.

Loman made a total of approximately $475,000 in illicit gains through this scheme.

"[Loman] engaged in a troubling pattern of conduct that involved leveraging his privileged position as a trusted, corporate insider to use confidential, sensitive financial information that he possessed to bet against his own company in a series of sophisticated stock trades conducted in a brokerage account that was hidden from view from his employer," prosecutors argued in a sentencing memorandum.

In July 2019, the Securities and Exchange Commission filed a lawsuit against Loman, charging him with insider trading. Trial is scheduled for that lawsuit in April 2022.

The FBI investigated this matter.

Assistant United States Attorneys Scott Paetty and Karen E. Escalante of the Major Frauds Section prosecuted this case.

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