Former CFO of New Haven Biotech Firm Admits Embezzling $1 Million

John H. Durham, United States Attorney for the District of Connecticut, announced that THOMAS MALONE, 49, of New Haven, pleaded guilty today in New Haven federal court to charges related to his embezzlement of approximately $1 million from a New Haven biotech company that receives federal research grants.

According to court documents and statements made in court, Malone was the chief financial officer (CFO) of Artificial Cell Technologies, Inc. (ACT) of New Haven, a small biotech company that is currently working on developing better ways to deliver malaria and Respiratory Syncytial Virus vaccines to affected populations.  In addition to receiving funding from private investors, ACT has received approximately $4.1 million in grants from the National Institutes of Health (NIH) since 2008.  As the CFO, Malone’s responsibilities included collecting, posting, and depositing investor and grant funds; tracking and reporting grant expenditures; managing accounts payable and cash disbursements; facilitating payroll; reconciling ACT credit card and bank accounts; and providing overall financial management.

In November 2016, ACT’s chief executive officer discovered that Malone was paying himself approximately $660,000 in annual salary, far above the approximately $281,000 in salary he was entitled to receive.  Upon further review of payroll and other financial records, ACT’s CEO discovered that, for several years, Malone had been writing checks to himself that were disguised as bonuses, that he had been giving himself unauthorized additional salary payments, that he had been using the ACT credit card for personal expenditures, and that he had used ACT’s funds to make unauthorized donations to an organization that Malone personally supported.  A subsequent forensic audit revealed that, between 2012 and 2016, Malone had embezzled nearly $1 million from ACT.

Malone was arrested on a criminal complaint on March 1, 2018.

Malone pleaded guilty to four counts of theft from a program involving federal funds, an offense that carries a maximum term of imprisonment of 10 years on each count.  He also has agreed to pay restitution of $1,031,508.07.

Malone is scheduled to be sentenced by U.S. District Judge Janet Bond Arterton on January 18, 2019.  He is released on a $50,000 bond pending sentencing.

This matter is being investigated by the U.S. Department of Health and Human Service, Office of Inspector General, and the Federal Bureau of Investigation.  The case is being prosecuted by Assistant U.S. Attorney Douglas P. Morabito.