Crime - Sacto 911

Former Davis biotech executive pleads not guilty to securities fraud

Hector Absi, former chief operating officer of Marrone Bio Innovations Inc. of Davis, has been charged with fraud.
Hector Absi, former chief operating officer of Marrone Bio Innovations Inc. of Davis, has been charged with fraud.

The former chief operating officer of a Davis biotech company pleaded not guilty Wednesday to charges of doctoring the company’s financial results.

Hector Absi, who was the No. 2 officer at Marrone Bio Innovations Inc. during 2014, watched silently as defense attorney William Portanova entered the not guilty plea before Magistrate Judge Allison Claire in U.S. District Court in Sacramento. Absi declined an interview request after the brief hearing.

Absi, 47, was accused of artificially inflating Marrone Bio’s revenue. Prosecutors said Absi gave some of the company’s outside distributors “inventory protection” that allowed them to sell Marrone Bio’s eco-friendly pesticides back to the company if they couldn’t sell them. That wasn’t illegal, but keeping the agreements secret from the company’s accountants was fraudulent, prosecutors said.

The company disclosed that it was launching an internal investigation of its finances in September 2014, a month after Absi left. The disclosure has bedeviled Marrone Bio ever since, hurting business operations and badly depressing its stock price. Marrone Bio’s shares closed Wednesday at $1.15, up 11 cents, on the Nasdaq market.

The company’s internal investigation concluded last fall, when it disclosed that it had overstated revenue by $6.7 million over an 18-month period, a considerable sum for a company whose sales totaled $9.1 million for all of 2014.

Absi is also being sued for fraud by the Securities and Exchange Commission. The SEC earlier this month settled its investigation of the company itself, with Marrone Bio agreeing to pay a $1.75 million fine for misleading investors. The company faces shareholder lawsuits, which have been consolidated in U.S. District Court in Sacramento.

In addition, Marrone disclosed Wednesday that it’s facing possible delisting by Nasdaq because its total market value – stock price multiplied by the number of shares – had closed below the $15 million minimum for the past 30 trading days. The company has 180 days to get back into compliance, and a recent surge in its price has lifted its market value to $28 million.

Absi was arrested Feb. 17 at his home in Las Vegas and charged with securities fraud, falsifying corporate records and other charges. He was allowed to go free after posting a $50,000 unsecured bond.

Dale Kasler: 916-321-1066, @dakasler