Former Chief Operating Officer of Davis Bio-Pesticide Company Sentenced to 2 Years in Prison for Conspiracy to Commit Mail, Wire, and Securities Fraud

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FILE PHOTO: Signage is seen at the United States Department of Justice headquarters in Washington, D.C.

SACRAMENTO, Calif. — Hector Absi, 51, of Las Vegas, Nevada, was sentenced today to two years in prison for conspiracy to commit mail fraud, wire fraud, and securities fraud, U.S. Attorney Phillip A. Talbert announced.

According to court documents, Absi is the former head of the sales department of Marrone Bio Innovations Inc. (MBI), a company headquartered in Davis that produces “bio-based” pesticides. Absi also served as MBI’s Chief Operating Officer from January 2014 until his resignation in August 2014. MBI is a publicly traded company; its stock trades on the NASDAQ exchange under the ticker symbol “MBII.” As a publicly traded company, it is required to file quarterly and annual reports with the Securities and Exchange Commission (SEC). In its reports, MBI stated that it recorded revenue in accordance with generally accepted accounting principles (GAAP).

On Oct. 17, 2019, Absi pleaded guilty conspiracy to commit mail fraud, wire fraud, and securities fraud. According to his plea agreement, in order to increase sales, Absi sold MBI products to customers with side agreements that offered “inventory protection” under which MBI agreed to either repurchase the product from the customer or continue the date by which the customer would need to make full payment for the product. Under GAAP, revenue from sales that include such agreements cannot be recognized on the company’s books at the time of the sales. Between March 2013 and July 2014, 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 no sales under such terms. By concealing the practice, Absi caused MBI to report a doubling of its revenue in 2013 in comparison to 2012. Absi also conspired to backdate the delivery of certain shipments of MBI’s products to enhance MBI’s reported revenues for the quarter. Absi received a performance-based bonus and exercised stock options during a time when MBI’s inflated revenue figures were being reported.

This case was the product of an investigation by the Federal Bureau of Investigation. Assistant U.S. Attorney Lee S. Bickley prosecuted the case.

A restitution hearing is scheduled for June 13, 2022.