Ex-Mylan executive gets prison time in $8M insider trading scheme

A former Mylan executive who pleaded guilty to insider trading in the pharmaceutical company’s stock will serve two years in federal prison.

Dayakar Mallu, 54, of Orlando, Fla., is expected to report to a federal correctional facility to begin his sentence by Nov. 19 for his role in what the government said was an $8 million scheme.

He must also forfeit $4.2 million and pay $7 million in restitution to the IRS for unpaid taxes.

Mallu, formerly of McDonald, was sentenced Tuesday by US District Judge W. Scott Hardy after pleading guilty to one count of conspiracy to commit securities fraud and one count of filing a false tax return on Sept. 17, 2021.

Mallu worked for Mylan — which has since merged with Pfizer’s generic business, Upjohn, to become Viatris — from May 2011 until March 2017, spending the last three years as vice president of global operations information technology.

After Mallu left, a corporate officer still with Mylan gave him nonpublic, inside information about the company’s upcoming business dealings, prosecutors said.

Mallu used that information, the government said, to inform his stock purchases between September 2017 and July 2019.

Charges dismissed

The federal government initially identified the corporate officer as Ramkumar Rayapureddy of Upper St. Clair and charged him in November 2022 with one count of conspiracy to commit securities fraud and three counts of securities fraud.

But the case against Rayapureddy was dismissed with prejudice in January, two weeks before trial was scheduled, based on a request by the government.

In its motion, the government wrote only that a dismissal was “in the interest of justice.”

Rayapureddy’s defense attorney, however, said the case was dismissed because the charges against him were false.

Numerous documents in the case remain under seal, and it is unclear whether they might provide additional insight into the government’s decision to not prosecute Rayapureddy.

In a joint filing addressing the continued sealing of documents, Rayapureddy’s attorneys wrote that they wanted the records to be made public.

“Among other things, Mr. Rayapureddy is no government longer a defendant, and the wrongly and falsely accused him of a serious crime,” one of his lawyers wrote.

“While the government dismissed the case with prejudice, it has refused Mr. Rayapureddy’s request to issue a press release announcing the dismissal of the charges, and has yet to remove from the (Justice Department) website, or even update, the press release announcing the – now dismissed – charges in this case.”

The law firm representing Rayapureddy said in a news release at the time that they were prepared to prove at trial that the evidence against him had been fabricated and that their client did not provide any inside information to Mallu.

“With trial fast approaching, and knowing the jury would soon see the defense, the government had little choice but to dismiss the case,” they said.

The charges against Rayapureddy were filed more than a year after Mallu was accused of insider trading.

Rayapureddy is listed online as Viatris’ chief information officer. A message left with the company Tuesday was not immediately returned.

‘Pervasive and unrepentant’

Assistant US Attorney Matthew Reilly, of the US Department of Justice fraud section, said Mallu conducted at least five transactions based on tips he received.

For example, in September 2017, the same day Mallu learned that Mylan’s generic option for Copaxone, a multiple sclerosis treatment, was about to be approved by the Food and Drug Administration, he bought nearly $800,000 in Mylan stock.

Four days later, when the approval was announced, Mallu’s stock value increased by nearly $700,000.

Reilly urged Hardy to sentence Mallu at the top end of the 46- to 57-month guideline range, calling Mallu’s crimes “pervasive and unrepentant.”

Mallu, the prosecutor said, “preyed on the company he worked for and took advantage.

“This is, throughout, deliberate criminal conduct.”

Mallu’s repeated failure to pay taxes, too, showed a brazen disregard for the law, the prosecutor said.

The charges against Mallu alleged that he realized a net gain of $4.2 million, which he shared with his co-conspirator.

But on Tuesday, Mallu’s attorney argued that his client actually lost $6 million on the trades he made.

Defense attorney Aitan Goelman asked Hardy for a sentence far below the guidelines — just one day of incarceration — arguing that the proposed penalty was artificially inflated based on how much money was involved in the insider trading.

“Mr. Mallu lost money, we balance, in this trade,” Goelman said.

But the government told Hardy that just because Mallu was bad at insider trading doesn’t mean he should be given a break.

“His goal was to make as much money as possible,” Reilly said. “He just wasn’t good at it.”

Clouded judgment

Goelman also told the court that in the last eight years, defendants facing white-collar fraud sentences have received penalties below the guideline range — based on personal circumstances or other factors.

Mallu was entitled to one, as well, Goelman said.

Several letters submitted on Mallu’s behalf — all of which appear to be under seal in the court docket — painted him as a loving son, husband and father, the judge said.

He served as a mentor to others and volunteered in charitable organizations, the court continued.

Since Mallu was charged, his attorney said, his health has suffered, he’s lost all of his money, and is now left with “impossible-to-repay debt.”

“He already has paid a deep price for his crimes,” Goelman said, “disgraced, unemployable, impoverished, older man facing retirement.”

Mallu apologized for his actions and thanked the court for allowing him to travel to India while he was out on bond to see his ailing father before he died.

The defendant expressed regret and shame, saying that before his crimes, he felt he always served as a model for others.

“My actions were against everything I believe,” Mallu said. “I still struggle to understand how I let myself fall into such selfish and careless behavior.

“I let my greed cloud my judgment.”

Mallu said he regretted how his crimes impacted his family.

“They should not be punished because of my mistakes,” he said. “I will never stop feeling guilty I put so much burden on my children.”