Former Mylan executive sentenced to prison for $8 million insider trading scheme

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

Dayakar Mallu, 54, of Orlando, Florida, is expected to report to a federal penitentiary to begin serving his sentence by Nov. 19 for his role in what the government says was an $8 million scheme.

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

Mallu, formerly of McDonald, was sentenced Tuesday by U.S. 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 September 17, 2021 .

Mallu worked for Mylan – which has since merged with Pfizer’s generics business, Upjohn, to form Viatris – from May 2011 to March 2017, and spent the last three years as vice president of global IT operations.

After Mallu left, prosecutors say, a corporate executive still working at Mylan provided him with nonpublic, confidential information about the company’s upcoming business deals.

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

Charges dismissed

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

However, in January, two weeks before the hearing was scheduled, the case against Rayapureddy was dismissed with prejudice at the government’s request.

In its application, the government wrote only that the release was “in the interests of justice.”

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

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

In a joint filing seeking further sealing of the documents, Rayapureddy’s lawyers said they wanted the records made public.

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

“Although the government dismissed the case with prejudice, it denied Mr. Rayapureddy’s request for a press release announcing the dismissal of the charges and has not yet removed from the (Department of Justice) website or even updated the press release announcing the now dismissed charges in this case.”

The law firm representing Rayapureddy said in a press release at the time that it was prepared to prove at trial that the evidence against him was fabricated and that their client had not provided any confidential information to Mallu.

“With trial approaching and knowing that the jury would soon see the defense, the government had no choice but to dismiss the case,” they said.

The charges against Rayapureddy came more than a year after Mallu pleaded guilty to insider trading.

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

“Unipresent and unrepentant”

Assistant U.S. Attorney Matthew Reilly of the U.S. Department of Justice’s Fraud Division said Mallu conducted at least five transactions based on tips he received.

For example, in September 2017, on the same day that Mallu learned that the U.S. Food and Drug Administration was about to approve Mylan’s generic option for Copaxone for the treatment of multiple sclerosis, he bought nearly $800,000 worth of Mylan stock dollars.

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

Reilly urged Hardy to sentence Mallu at the upper end of the allowable range of 46 to 57 months, calling Mallu’s crimes “pervasive and unrepentant.”

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

“This is, broadly speaking, an intentional criminal act.”

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

The charges against Mallu alleged he made a net profit 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 trades he made.

Defense attorney Aitan Goelman asked Hardy for a sentence well below the guidelines – just one day in prison – arguing that the proposed sentence was artificially inflated based on the amount of money involved in the insider trading process.

“Mr. Overall, Mallu lost money on this transaction,” Goelman said.

However, the government told Hardy that just because Mallu was bad at insider trading didn’t mean he should be left alone.

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

Vague judgment

Goelman also told the court that over the past eight years, defendants facing white-collar fraud convictions received sentences below the recommended range – depending on their personal circumstances or other factors.

Goelman said Mallu also had the right to do so.

The judge said several letters sent on Mallu’s behalf – all of which appear to be sealed in court records – portrayed him as a loving son, husband and father.

He acted as a mentor to others and volunteered for charitable organizations, the court continued.

His lawyer said that since Mallu was charged, his health has deteriorated, he has lost all his money and is now left with an “unsustainable debt.”

“He has already paid a heavy price for his crimes,” Goelman said, “a disgraced, unemployed, impoverished, elderly man facing retirement.”

Mallu apologized for his actions and thanked the court for allowing him to travel to India while he was on bail to meet his sick father before his death.

The accused expressed regret and shame, claiming that before committing the crime he felt that he had always been a role model for others.

“My actions went against everything I believe in,” Mallu said. “I still can’t understand how I could allow myself to be so selfish and careless.

“I allowed my greed to cloud my judgment.”

Mallu said he regrets how his crimes have affected his family.

“They shouldn’t be punished for my mistakes,” he said. “I will never stop feeling guilty for putting such a heavy burden on my children.”