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The U.S. Securities and Exchange Commission on Thursday filed insider trading charges against the chief information officer of a pharmaceutical company in an alleged $8 million scheme, while the U.S. Justice Department filed criminal charges in the case.
The SEC said in its lawsuit that between September 2017 through July 2019, Ramkumar Rayapureddy, CIO of Canonsburg, Pennsylvania-based Viatris Inc., which was formerly known as Mylan NV, tipped off Dayakar R. Mallu, a friend and former colleague, on material nonpublic information about Mylan’s unannounced drug approval by the U.S. Food & Drug Administration, financial results and an impending merger with a Pfizer Inc. division.
Pfizer Inc. unit Upjohn Inc., which was Pfizer’s off-patent branded and generic business, merged with Mylan in November 2020, according to the lawsuit filed in U.S. District Court in Pittsburgh in Securities and Exchange Commission v. Ramkumar Rayapureddy.
The SEC complaint alleges that Mr. Mallu generated gains totaling nearly $8 million and avoided losses by trading Mylan securities based upon Mr. Rayapureddy’s tips and shared a portion of his profits with Mr. Rayapureddy through cash payments in India.
The SEC and the Department of Justice have previously charged Mr. Mallu, they said in their statements.
The SEC, which is charging Mr. Rayapureddy with violating federal securities law, seeks a permanent injunction, disgorgement, a civil penalty and a permanent bar against him serving as an officer or director of a public company.
He was charged by the Justice Department with one count of conspiracy to commit securities fraud and three counts of securities fraud, according to a separate statement by the DOJ.
If convicted, he faces a maximum penalty of 20 years in prison on each of the securities fraud charges and five years in prison on the conspiracy charge.
The Justice Department said in September 2021 Mr. Mallu pleaded guilty to conspiracy to commit securities fraud and aiding in the preparation of a false tax return, and he is awaiting sentencing.
A spokesperson said in a statement, “Since the charges against Dayakar Mallu were made public over a year ago, the company has thoroughly and independently assessed all relevant information available to it. We take the government’s allegations made today against Ramkumar Rayapureddy very seriously and will continue to review the matter in the same fashion. The company is committed to the highest standards of integrity and compliance with the law. Ramkumar Rayapureddy is on a leave of absence from the company. We have and will continue to fully cooperate with the authorities, and we expect to have no further comment on this matter.”