Former Phlow Corp. VP accused of insider trading Former Richmond pharma exec, cousin arrested for insider trading

<a href="https://www.sec.gov/litigation/complaints/2023/comp-pr2023-38.pdf" target="_blank">A former Richmond pharmaceutical company executive</a> has been arrested and accused of a pandemic-era insider trading scheme that allegedly netted he and his cousin over $1.5 million in illegal profits.

<a href="https://www.sec.gov/litigation/litreleases/2023/lr25647.htm" target="_blank">James Andrew Stiles</a>, a former vice president of government initiatives and contract compliance for Richmond-based Phlow Corp., was arrested last week by federal officials. The Department of Justice charged Stiles with multiple counts of securities fraud and conspiracy to commit both wire and securities fraud.

He is alleged to have traded stocks for the Eastman Kodak Co. and Novavax Inc. based on privileged information he had as an industry insider during 2020. He was involved with both companies as they negotiated separate deals for government funding to aid in the response to COVID-19.

Stiles is alleged to have shared insider information with his cousin, Gray Stiles of Richmond, who also traded on that information for a profit. According to the complaint, the two were close friends and grew up together in Ashland.

<a href="https://www.sec.gov/litigation/complaints/2023/comp-pr2023-38.pdf" target="_blank">The complaint</a> was made by the Securities and Exchange Commission.

"By stealing confidential business information, Andrew Stiles allegedly betrayed the trust and confidence of his employer - a pharmaceutical company working to help the public at the height of the COVID-19 pandemic - and schemed with his cousin, Gray Stiles, to collectively make more than a million dollars of illegal profits," said U.S. Attorney Damian Williams in a statement.

In 2020, Kodak was exploring the idea of transferring its underused resources for processing film into the processes used to make pharmaceuticals, specifically KSMs and APIs for generic medicines to combat COVID. Kodak was put in contact with Phlow Corp. which guided Kodak in its efforts to obtain government financing.

Phlow was already a major player in the pharma space. It received a $345 million contract from the Biomedical Advanced Research and Development Authority in 2020 to onshore drug-making from overseas with efforts centered in the Richmond area.

That process resulted in Kodak being considered for a $765 million loan from the federal government.

The SEC complaint alleges that Stiles had knowledge of those negotiations and correspondences and that he purchased shares in Kodak before it was publicly announced that the company would be awarded the loan.

The complaint details text exchanges between Stiles and his cousin discussing the timing of buying and selling stocks.

The SEC alleges that Stiles sold his entire position in Kodak for $553,000 shortly after the Wall Street Journal published an article on July 28, 2020, about government interest in awarding the loan. Gray Stiles allegedly netted $990,000 for selling his shares around the same time.

Stiles was employed by Phlow between May 1, 2020, and Dec. 15, 2021.

The company said in a statement that the indictment is of Stiles in his individual capacity, and points out that there are no allegations of improper trading of shares in Phlow stock.

"Nor does the indictment implicate any other current or former Phlow employee in any wrongful activity or insider trading," Phlow said in the statement. "Because this is an ongoing federal matter, Phlow will not make any further comment about Mr. Stiles or any allegations in the case."

The SEC complaint alleges that Stiles also engaged in privileged trading before he started working with Phlow.

In April 2020, Stiles was working with consulting and accounting firm BDO. Stiles consulted with Novavax on the biotech company's efforts to get government funding for a new COVID vaccine.

The complaint says Stiles purchased thousands of dollars worth of shares in Novavax while on virtual meetings with the company's executives, before Novavax was awarded any funding. He allegedly netted $45,000 when selling the shares later.

No hearing has been set for the case. The SEC is seeking to have the defendants barred from trading stock and forfeit their "ill-gotten" earnings on top of prejudgment interest and other penalties.

<strong>Sean Jones</strong> (804) [email protected]: @SeanJones_RTD