The Department of Justice and the Securities and Exchange Commission (SEC) announced charges against a former executive of Mylan Pharmaceuticals last Thursday. The agencies said that Ramkumar Rayapureddy, former Global Chief Information Officer, tipped his friend and former colleague, Dayakar Mallu, about developments within the company, resulting in windfalls of nearly $8 million for Mallu and a portion of the illicit profits for Rayapureddy.
The SEC’s complaint, filed in the Western District of Pennsylvania, specifies that Rayapurreddy tipped Mallu from at least September 2017 through July 2019. The pair reportedly discussed the unannounced Food & Drug Administration approval of a Mylan drug, financial results, and an impending merger with a division of Pfizer Inc.
The SEC describes how Rayapureddy offered information to Mallu on the phone, in person, and through a secure messaging app. In one instance, Rayapurredy allegedly told Mallu the company was expecting to announce below-target financial results, prompting the latter to sell shares before the stock declined. As a result of closing his existing put option contracts before the announcement, Mallu allegedly avoided losses of over $700,000, the SEC says.
The agencies note that in September 2021, Mallu pleaded guilty to conspiracy to commit securities fraud and aiding in the preparation of a false tax return and is awaiting sentencing.
The SEC seeks a permanent injunction, disgorgement, a civil penalty, and an officer and director bar. Criminally, Rayapureddy is faced with one count of conspiracy to commit securities fraud and three counts of securities fraud. If convicted, he could receive up to 20 years in prison on each of the securities fraud charges and five years in prison on the conspiracy charge.