The former chief financial officer of a New Haven biotech firm was sentenced to two years in prison Wednesday for stealing more than $1 million from the business.
U.S. District Judge Janet Bond Arterton imposed the sentence on Thomas Malone, 49, of New Haven. Malone’s prison term will be followed by three years of supervised release. Arterton also ordered Malone to pay restitution of $1,031,508.
Malone had been the CFO of Artificial Cell Technologies Inc., or ACT, which is working to deliver malaria and Respiratory Syncytial Virus vaccines to affected populations.
ACT officials described the impact the theft has had on both the company and its vaccine development during the court proceeding in New Haven.
Donald Masters, president and CEO of ACT, told Arterton the theft put a “significant strain” on the company and prompted some financial backers to refuse to do business with it.
He noted how thousands die from malaria each year. According to the World Health Organization, an estimated 435,000 people died from the disease in 2017 alone.
“I am also concerned about the scientific impact,” Masters said. “We are working on a malaria vaccine. This is a drug that will be sold in places where it will save lives.”
According to Masters, the project has been delayed two years, and any delay could mean lives lost.
The company discovered the theft in November 2016. Malone was paying himself approximately $660,000 in annual salary, even though he was supposed to be getting only about $281,000, according to the U.S. Attorney’s office.
Assistant U.S. Attorney Douglas P. Morabito asserted Malone “simply wanted to live beyond his means.”
Malone spent the embezzled money on building materials, adult entertainment, hotels, liquor, restaurants and home renovations, according to Morabito.
“This is not a person who was in financial distress,” Morabito said. “He had a very high salary, and it just wasn’t enough for him. He did it because he wanted to live a lifestyle he couldn’t afford.”
“[The ACT victims] believe they will come up with a vaccine for malaria, and they believe this has set them back,” Morabito added.
As CFO, Malone had multiple financial responsibilities, including overall financial management. According to federal prosecutors, Malone wrote checks to himself that were disguised as bonuses, gave himself unauthorized additional salary payments, and used the company credit card for personal expenditures. A forensic audit showed he embezzled about $1 million from ACT over a four-year period, from 2012 to 2016.
When given a chance to address the judge, Malone said he wanted to apologize to everyone at ACT.
“I thought the additional money was immaterial to the company,” he said.
According to Malone, at the time of the theft he was dealing with the break-up of his marriage and his father’s declining health.
“I will do whatever I can to make amends,” he said. “I am embarrassed to be in federal court, but the actions were mine, and so will be the consequences.”
Malone’s defense attorney, Craig Raabe of West Hartford, called it an “unusual” embezzlement case because the additional compensation was documented, even though it was unauthorized.
“Mr. Malone is truly sorry for what he has done,” Raabe said. “He understands there are consequences, and he wants to make amends.”
“I don’t think it is appropriate to put it on his shoulders that the [malaria vaccine] product is not out to market,” Raabe added.
Malone was arrested on March 1, 2018. In October he pleaded guilty to four counts of theft from a program involving federal funds. 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.
Free on a $50,000 bond, Malone is required to report to the federal Bureau of Prisons on June 19.
Contact Michelle Tuccitto Sullo at msullo@newhavenbiz.com
