October 31, 2018

Biotech ex-CFO pleads guilty to embezzlement

The ex-chief financial officer of a New Haven biotech company pleaded guilty in federal court on Tuesday to charges he embezzled more than $1 million in federal grant and investor funds from his former employer, Artificial Cell Technologies Inc, (ACT).

Malone pleaded guilty to four counts of theft from a program involving federal funds, an offense with a maximum prison term of 10 years per count. He also has agreed to pay restitution of $1,031,508.07. He was released on a $50,000 bond and is scheduled to be sentenced by U.S. District Judge Janet Bond Arterton on Jan. 18. He had been arrested on the charges on March 1.

Located at the 5 Science Park biotech complex, ACT develops manufacturing processes for vaccines with the goal of faster and on-demand delivery. While working as the small company's CFO, Malone used his access to investor and grant funds to pay himself $660,000 a year in salary, far in excess of his $281,000 stated compensation. Malone also used the ACT credit card for personal expenditures and used company funds to make unauthorized donations to an organization he personally supported, according to the U.S. Attorney.

ACT's CEO first discovered financial irregularities In November 2016. After further review of payroll and other financial records, it was found that Malone had been writing checks to himself disguised as bonuses and giving himself unauthorized additional salary payments. A subsequent forensic audit revealed that, between 2012 and 2016, Malone had embezzled nearly $1 million from ACT.

In addition to receiving funding from private investors, ACT has received approximately $4.1 million in grants from the National Institutes of Health since 2008, according to the U.S. Attorney's office.

Other authorities investigating the embezzled funds include the U.S. Department of Health and Human Services, the Office of Inspector General and the Federal Bureau of Investigation.

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