New York Attorney General (“NYAG”) Letitia James recently announced that she filed an insider trading suit against Emergent BioSolutions’ former CEO Robert Kramer for selling Emergent shares while in possession of material nonpublic information regarding contamination issues that affected the manufacture of AstraZeneca’s COVID-19 vaccine. State prosecutors are seeking damages from Kramer as well as the disgorgement of ill-gotten gains and costs connected to the state securities law violations. James also announced that the New York Office of the Attorney General (“OAG”) reached a $900,000 settlement with Emergent to resolve allegations that the company allowed Kramer to use a Rule 10b5-1 trading plan while in possession of MNPI. As part of the settlement, Emergent agreed to improve its executive trading policies.
According to the OAG’s complaint, in 2020, Emergent signed approximately $261 million in contracts with AstraZeneca to manufacture a commercial supply of its COVID-19 vaccine, which caused Emergent’s stock price to rise more than 43 percent. However, on October 6, 2020, Kramer allegedly received a PowerPoint presentation that included slides about “aborted, contaminated batches of the vaccine,” and, on October 13, 2020, Emergent concluded that the contamination issue would likely cause multiple batches of the vaccine to be lost. State prosecutors allege that just one day after Emergent reached this conclusion, Kramer asked his investment advisor to implement a good-faith stock trading plan (pursuant to Securities and Exchange Commission Rule 10b5-1) – a plan designed to allow corporate executives to sell their company stock at set dates and prices. On November 13, 2020, Emergent reportedly approved the plan and, before the contamination issues were announced publicly, Kramer sold his Emergent stock in January and February of 2021, allegedly enabling him to generate more than $10 million from the sales. According to the complaint, Emergent’s stock price declined steadily after these sales and never recovered. The OAG alleges that Kramer’s use of the Rule 10b5-1 plan to sell his Emergent stock while in possession of undisclosed information about the contamination and manufacturing issues, violated federal securities law and New York’s Martin Law, which both forbid securities trades while in possession of MNPI and make no exceptions for Rule 10b5-1 plans.
NYAG Press Release | OAG Complaint | Settlement