SACRAMENTO — The former chief operating officer of Davis-based Marrone Bio Innovations Inc. pleaded not guilty Wednesday to federal criminal charges including mail, wire and securities fraud.
Hector Absi. Courtesy photo
Hector Absi, 47, entered the plea during his first appearance in U.S. District Court in Sacramento, where last week federal prosecutors unveiled a 16-count grand jury indictment that accused Absi of using unlawful sales practices in order to double MBI’s reported revenue figures from 2012 to 2013.
U.S. Magistrate Judge Allison Claire read each of the charges against Absi — which also include conspiracy to commit fraud, making false statements to an accountant of a publicly traded company and falsifying the books or records of a corporation — and set a March 24 status conference before Judge Morrison England Jr., who is presiding over multiple civil lawsuits stemming from Absi’s alleged actions.
Absi’s attorney, William Portonova, declined to comment at length on the allegations following the hearing, saying he and another attorney, Rick Kornfeld of Colorado, had just recently been retained.
“We just got into the case and we are looking at it with fresh eyes,” Portonova said.
The federal indictment alleges that Absi, responsible for global sales, marketing and business development for the maker of bio-based pesticides, met MBI’s revenue-doubling goals by selling products to customers with side agreements that offered “inventory protection.” Under those agreements, the company agreed to either repurchase the product from the customer or extend the terms of payment if the customer was still in possession of the product after a specified time period.
Under “generally accepted accounting principles,” revenue from sales that include such agreements cannot be recognized on the company’s books.
Between March 2013 and July 2014, according to the indictment, Absi conspired with at least one other MBI employee to misrepresent to MBI’s accounting department, its external auditors, and the investing public that MBI had made sales under such terms.
Absi also is alleged to have conspired with others to backdate the delivery of certain shipments of MBI’s products to enhance reported revenues for the quarter, receiving a performance-based bonus of $35,000 to $40,000 and exercising more than $200,000 in stock options as a result of the inflated revenue figures.
He resigned from MBI in August 2014, triggering a period of financial and legal turmoil for the company that included a 44 percent single-day drop in its NASDAQ share prices as well as investigations by the U.S. Attorney’s Office and the Securities and Exchange Commission.
MBI agreed to pay $1.7 million in civil penalties to settle SEC allegations of securities fraud, and internal controls and books and records violations. Founder and CEO Pam Marrone and former chief financial officer Donald Glidewell reimbursed the company a combined $27,000 for the financial incentives they received as a result of the increased sales figures.
Absi was arrested Feb. 17 at his Las Vegas home and released on condition that he surrender his passport and refrain from contacting victims or witnesses in the case. On Wednesday, Claire also ordered Absi to sign a $50,000 unsecured bond, provide a DNA sample and avoid weapons and illegal drugs.
— Reach Lauren Keene at lkeene@davisenterprise.net or 530-747-8048. Follow her on Twitter at @laurenkeene