LOS ANGELES – A former executive at Hawthorne-based semiconductor company OSI Systems Inc. was indicted today on charges of using inside information to “short” his employer’s stock and, later, to illegally purchase shares of a company OSI confidentially had targeted for acquisition, in a scheme that allegedly netted a total of more than $567,000 in illicit gains.
Mark A. Loman, 58, of Hermosa Beach, was named in a federal grand jury indictment that charges him with five counts of securities fraud and five counts of insider trading. Loman is scheduled to be arraigned on the indictment on December 10 in United States District Court in downtown Los Angeles.
Loman was OSI’s vice president of finance and corporate controller from 2006 until 2017. In these roles, Loman had advance knowledge of OSI’s revenue and earnings and, as controller, was responsible for compiling and internally reporting the company’s confidential financial results.
The indictment alleges that, in October 2015, Loman received confidential information that OSI and its subsidiaries were financially underperforming and would fall far short of their earnings and revenue forecast for its second quarter of fiscal year 2016. Acting on this information in November and December of 2015, Loman shorted 3,000 shares of OSI stock with the intent of profiting when OSI’s share price declined, according to the indictment. During this time, Loman also allegedly purchased a series of option contracts with the intention of profiting when OSI’s stock price fell.
On January 27, 2016, OSI announced its disappointing second-quarter earnings, and also lowered its sales and earnings guidance for the remainder of its fiscal year. On the day of this announcement, OSI shares plunged 35 percent in value from their previous closing day price. As a result, Loman allegedly gained $446,436 in illegal profits from this scheme.
The indictment further alleges that in February and March of 2016, Loman misused nonpublic information by purchasing stock of American Science & Engineering Inc., a Billerica, Massachusetts-based manufacturer of X-ray equipment that OSI had targeted for acquisition. Once OSI publicly announced in June 2016 its agreement to acquire ASEI, Loman immediately sold his ASEI shares and made approximately $120,900 in illegal gains, the indictment alleges. In September 2016, OSI formally acquired ASEI for $269 million.
In total, Loman made $567,335 in illicit gains through this scheme, according to the indictment.
In July 2019, the Securities and Exchange Commission filed a lawsuit against Loman, charging him with insider trading.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
Each charge of securities fraud carries a statutory maximum sentence of 25 years in federal prison. The statutory maximum sentence for each count of insider trading is 20 years in federal prison.
The FBI investigated this matter.
This case is being prosecuted by Assistant United States Attorneys Ashwin Janakiram and Alexander C.K. Wyman of the Major Frauds Section.