The former chief operating officer of Marrone Bio Innovations Inc. was sentenced today to two years in prison for a scheme to inflate the sales reported by the Davis-based biotech company.
Hector Absi, 51, currently of Las Vegas, was sentenced for conspiracy to commit mail fraud, wire fraud and securities fraud, said the U.S. Attorney’s Office in Sacramento, in a news release.
Absi was the former head of the sales department at Marrone (Nasdaq: MBII), which develops and sells biological-based pest controls for agriculture. Absi was the company’s chief operating officer from January 2014 until he resigned in August 2014. He worked in sales at the company before that.
Founder Pam Marrone started Marrone Bio in Davis in 2006 and took it public in 2013. In 2015, the company was hit with an accounting scandal after Absi was found to have falsified sales numbers the previous years to make a bonus. The incident cost the company half its employees and more than $13 million for investigations, fines and other expenses. Marrone Bio also lost hundreds of millions of dollars in stock market value as its share price collapsed.
In October, 2019, Absi pleaded guilty to a federal charge of conspiracy to commit mail, wire and securities fraud.
According to his plea agreement, Absi sold products to customers with side agreements that offered “inventory protection” under which Marrone agreed to either repurchase the product from the customer or to continue the date by which the customer would need to make full payment. According to accounting principles, such sales cannot be recognized as sales on the company’s books. In his plea, he said he misrepresented the nature of the sales to the company’s accounting department and to external auditors, and thereby also to the investing public. Also, according to his plea, he backdated delivery of products to enhance sales numbers.
According to a release from the U.S. Attorney’s Office, Absi received a performance-based bonus and exercised stock options during a time when Marrone’s inflated revenue figures were publicly reported.
A restitution hearing for Absi is scheduled for June 13.
Last month, Bioceres Crop Solutions Corp. agreed to buy Marrone Bio in an all-stock transaction valued at $236 million. Bioceres (Nasdaq: BIOX) is based in Rosario, Argentina. Pending approvals, the transaction should close in the third quarter this year.
In January, Marrone Bio moved its headquarters to Raleigh, North Carolina. It maintains research and development operations in Davis.
