By Stella Lorence
BU News Service
BOSTON — Government prosecutors called a long-time friend and former colleague of PixarBio CEO Francis Reynolds to the witness stand to testify about Reynolds’ alleged illegal stock trading in the ninth day of jury trial at the U.S. District Court.
M. Jay Herod was a defendant in the Reynolds case, and pleaded guilty in February to manipulative trade practice and security fraud, according to defense attorney David Axelrod. He is now a cooperating witness to the case.
Herod testified that although Reynolds never explicitly directed him to buy or sell PixarBio stocks, Herod felt “obligated” to do as Reynolds told him.
“As time went on, he would mention over and over and over again that the price [of the PixarBio shares] was too low, which I took to mean it was time for me to intervene,” Herod said. “My main goal was just to buy shares to prop up the price.”
In his guilty plea, Herod admitted to participating in the two illegal stock trading practices called “matched trading” and “marking the close,” according to a February statement from the Department of Justice.
“Matched trading” is the practice of buying and selling shares of company stock for the same price. “Marking the close” involves purchasing stock just before the market closes, which makes the price higher and the stock appear more successful.
Herod testified that Reynolds did not know about or direct Herod to participate in the illegal stock trading practices, but that Reynolds would give Herod “pep talks” about selling the stock.
“He would say, ‘Look, I can’t tell you what to do, but the smart play would be…’” Herod said. “He said he wasn’t allowed to direct the trades or be involved in them. He always encouraged me to sell as much as I could.”
The jury trial is expected to continue on Monday, with government prosecutors calling a former attorney of Reynolds’, who defended him in a malpractice suit, as a witness.