Two years ago, Emergent BioSolutions came to a settlement with shareholders, agreeing to pay $40 million to resolve allegations of wrongdoing by company executives, which included insider trading during the COVID pandemic.
Now the state of New York is going after former Emergent CEO Robert Kramer, filing a lawsuit which accuses him of selling company shares and receiving more than $10 million before the company revealed contamination issues at a plant in Baltimore.
At the time, contract manufacturer Emergent produced COVID shots for AstraZeneca and Johnson & Johnson. New York alleges that Kramer sold his shares after learning of the contamination issue and before the information became public.
The high-profile production snafu forced the company to discard millions of doses of vaccines and to shut down production during the pandemic.
“Corporate executives who use insider information to illegally trade company stocks and make a profit betray the public’s trust,” New York Attorney General Letitia James said in a release. “At the height of the COVID-19 pandemic, Robert Kramer illegally profited millions by selling his company shares, while knowing that Emergent faced issues producing the AstraZeneca vaccine for millions of people. Kramer’s actions were illegal and unethical.”
James is seeking damages, disgorgement and costs from Kramer for violating securities laws spelled out in New York’s Martin Act, which forbids the trading of stock by company insiders who are in possession of material non-public information.
In addition to announcing the lawsuit, New York’s Office of the Attorney General (OAG) revealed a settlement in which Emergent will pay $900,000 in penalties and has agreed to adjust its executive trading policies.
Emergent came to prominence in 2020 when the U.S. government, as part of Operation Warp Speed, tapped the CDMO to produce COVID shots with a task order worth $628 million. As part of the pre-production scale up, Emergent hired 800 workers to bolster its staff at three sites in Maryland.
In the summer of 2020, Emergent announced two contracts with AZ worth a combined $261 million to manufacture its vaccine. In the first five months of the pandemic—as Emergent’s role as a major manufacturer of COVID vaccines became evident—the value of shares in the company rose from less than $50 to more than $133.
The lawsuit alleges that Kramer became aware of the contamination issue in October of 2020 and sold his shares in January and February of 2021. The problems didn’t become public until late March of that year, when the company alerted government officials that 15 million doses had been contaminated. Production of the shots was halted in mid-April of 2021.
In late April of 2021, Securities and Exchange Commission filings indicated that Kramer had sold more than $10 million worth of Emergent stock before the company’s shares began to tumble.