The former CEO and chairman of Ontrak Inc., a publicly traded health care company based in Miami, Florida, has been sentenced to 42 months in federal prison for insider trading. Terren Scott Peizer, aged 65 and residing in Puerto Rico and Santa Monica, was convicted of using Rule 10b5-1 stock trading plans to avoid losses exceeding $12.5 million.
United States District Judge Dale S. Fischer imposed the sentence on Peizer, who must also pay a $5.2 million fine and $12.7 million in restitution. A jury found Peizer guilty of one count of securities fraud and two counts of insider trading after a 10-day trial concluded in June 2024.
“Terren Peizer betrayed the trust of Ontrak’s investors, trading on inside information to offload company stock before a substantial price decline,” stated Matthew R. Galeotti from the Justice Department’s Criminal Division. He added that the sentence reflects their commitment to prosecuting frauds harming American investors.
Bill Essayli, United States Attorney, emphasized that “insiders must not be allowed to put their thumbs on the scales of the stock market,” noting that those undermining market integrity will face prison time.
This case is part of an initiative by the Justice Department’s Criminal Division’s Fraud Section aimed at identifying executive abuses of 10b5-1 trading plans. These plans can serve as a defense against insider trading charges unless entered into while possessing material non-public information or not done in good faith.
Peizer reportedly avoided significant losses by entering two Rule 10b5-1 trading plans while aware that Ontrak's largest customer might terminate its contract. The first plan was initiated in May 2021 following signs of a deteriorating relationship with the customer, who later indicated intent to terminate the contract. In August 2021, Peizer set up his second plan shortly after confirmation from Ontrak's chief negotiator about likely contract termination.
Despite warnings from brokers, a senior executive at Ontrak, and attorneys regarding cooling-off periods between plan initiation and stock sales, Peizer began selling shares immediately after establishing each plan. Just days after adopting his August plan, Ontrak announced the customer's contract termination leading to a more than 44% drop in its stock price.
The FBI led the investigation with significant assistance from FINRA’s Criminal Prosecution Assistance Group. The U.S. Attorneys Office along with Matthew Reilly from the Justice Department prosecuted this case; Assistant United States Attorney Jonathan S. Galatzan managed forfeiture proceedings.
