Attorney General Letitia James of New York filed an insider trading lawsuit on Thursday against a former biotech chief executive, accusing him of turning a $7.6 million profit on the sale of the company’s stock before the public learned that millions of doses of a Covid-19 vaccine were contaminated.
Filed in a New York State court, the lawsuit said that Robert G. Kramer, who was the chief executive of Emergent BioSolutions, knew of the systemic problems involving a vaccine it was helping AstraZeneca produce as part of the federal government’s Operation Warp Speed when he exercised his stock options.
The vaccine makers had to discard the tainted material and suspend production, sending Emergent’s stock into a free fall from its high of $134.46 a share in August 2020, according to the lawsuit.
Aside from the legal action against Mr. Kramer, who retired from Emergent in 2023, Ms. James announced on Thursday that the company, which is based in Gaithersburg, Md., would pay $900,000 as part of a settlement in connection with the insider trading case.
“Corporate executives who use insider information to illegally trade company stocks and make a profit betray the public’s trust,” Ms. James said in a statement. “Kramer’s actions were illegal and unethical, and we are holding him accountable.”
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In an email on Thursday, Kirby D. Behre, a lawyer for Mr. Kramer, described the lawsuit’s claims as baseless and an overreach by Ms. James.
“Mr. Kramer is proud of the role Emergent played in response to the Covid-19 pandemic,” Mr. Behre said. “The work performed was completed transparently with unprecedented collaboration with the U.S. government, including the F.D.A. Any suggestion to the contrary is not supported by the facts.”
Mr. Behre said Mr. Kramer had followed federal rules and company procedures when he exercised his stock options.
A spokeswoman for Ms. James declined to say if the attorney general’s office was weighing criminal charges against Mr. Kramer, who the lawsuit said had violated the Martin Act, New York’s stock fraud law.
Mr. Behre said “this is and always has been a civil matter,” and claimed that neither the U.S. Securities and Exchange Commission nor the Justice Department had pursued the case.
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His claims could not be independently verified.
The S.E.C. declined to comment on Thursday, and the Justice Department did not immediately respond to a message.
As part of Emergent’s settlement, the company agreed to make “enhancements” to its insider trading policy and to report trading plan activity of senior management and board members for three years to the New York attorney general.
“Emergent remains committed to the highest standards of quality, ethics and compliance, and has taken significant action to improve transparency and integrity in all aspects of its operations,” the company said in a statement on Thursday.
The $900,000 penalty that the company agreed to pay to New York State was a fraction of the amount of a 2024 settlement between Emergent and a group of investors who were part of a class-action litigation against the firm. The investors received $40 million after making similar insider trading complaints against company executives.
Emergent was supposed to be a linchpin of the federal government’s pandemic response. Years before Covid struck, the government paid the company to have its factory in Baltimore ready to rapidly produce millions of vaccine doses when needed.
In June 2020, the government awarded Emergent a $628 million contract to manufacture the vaccines developed by Johnson & Johnson and AstraZeneca. The company’s share price soared.
But behind the scenes, problems mounted. In October of that year, the company discovered that multiple batches of AstraZeneca’s vaccine had been contaminated, according to the attorney general’s lawsuit.
Employees struggled to identify and fix the problem.
After learning of the contamination, according to the lawsuit, Mr. Kramer set up a plan to sell company stock. The company approved the plan in November 2020, and the stock sales occurred in January and February 2021, netting Mr. Kramer about $7.6 million, according to the lawsuit.
During that time, Emergent’s struggles to manufacture the vaccine continued, and the company had to throw out millions of doses. Emergent also discovered cross-contamination that forced it to scrap millions of doses of Johnson & Johnson’s vaccine.
In March and April 2021, after the completion of Mr. Kramer’s stock sales, the factory’s troubles became public, and Emergent temporarily halted production at the request of the Food and Drug Administration. The company’s share price plunged.
Neil Vigdor covers breaking news for The Times, with a focus on politics.
The post New York Sues Former C.E.O. of Covid Vaccine Maker Over Insider Trading appeared first on New York Times.
