NEWARK, NJ – The former CEO, CFO and an executive director of a publicly traded health care services company were charged on Wednesday with allegedly orchestrating a widespread scheme to defraud investors and others out of hundreds of millions of dollars in connection with a merger transaction designed to convert the company into a private entity, U.S. Attorney Craig Carpenito and Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division announced.
Parmjit “Paul” Parmar, 48, of Colts Neck, New Jersey; Sotirios “Sam” Zaharis, 51, of Weehawken, New Jersey; and Ravi Chivukula, 44, of Freehold, New Jersey, are charged by complaint with one count of conspiracy to commit securities fraud and one count of securities fraud. FBI agents arrested Parmar earlier today near his home. He is scheduled to appear this afternoon before U.S. Magistrate Judge Leda Dunn Wettre in Newark federal court. Chivukula and Zaharis remain at large.
According to the complaint unsealed today:
From May 2015 through September 2017, the defendants orchestrated an elaborate scheme to defraud a private investment firm and others out of hundreds of millions of dollars in connection with the funding of a transaction to take private a healthcare services company (Company A) traded publicly on the London Stock Exchange’s Alternative Investment Market. To fund the transaction, the private investment firm put up $82 million and a consortium of financial institutions put up another $130 million. The scheme utilized fraudulent methods to grossly inflate the value of Company A and trick others into believing that Company A was worth substantially more than its actual value.
The complaint alleges that to present a positive picture of the company’s financial wealth, the defendants allegedly sought to raise tens of millions of dollars in the public markets, purportedly to fund Company A’s acquisitions of various operating subsidiaries. In reality, a number of those entities either did not exist or had only a fraction of the operating income attributed to them. The conspirators allegedly funneled the proceeds of these secondary offerings through bank accounts they controlled and used the money for a variety of purposes that had nothing to do with acquiring the purported targets. The money from one of the offerings was instead used to make it appear as if the operating subsidiary had substantial customer revenue when, in fact, the funds were simply transfers of the money that had been raised in the secondary offering. The defendants went to great lengths to make it appear that these funds were revenue, concocting phony customers and altering bank statements to make it appear as if the funds were coming from customers.
The conspirators allegedly:
• Created fictitious operating companies that Company A purportedly acquired in sham acquisitions.
• Falsified and fabricated bank records of subsidiary entities in order to generate a phony picture of Company A’s revenue streams.
• Generated fake income streams and phony customers of Company A and its subsidiaries.
• Made material misrepresentations and omissions to the private investment firm and others.
The defendants’ alleged actions caused the private investment firm and others to value Company A at more than $300 million for purposes of financing the transaction to take the company private.
The alleged scheme was uncovered around September 2017, when the defendants resigned from their positions with Company A or were terminated. On March 16, 2018, Company A and numerous of its affiliated entities filed for bankruptcy, attributing the company’s financial demise, in large part, to the fraud scheme.
The United States is expected to file a separate civil complaint today seeking forfeiture of four properties that Parmar owns or controls, including a house in Colt’s Neck and three apartments in New York City. Separately, the U.S. Securities and Exchange Commission also filed a civil complaint today against Parmar, Zaharis and Chivukula.
The conspiracy count with which the defendants are charged carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gain or loss from the offense. The securities fraud count carries a maximum potential penalty of 20 years in prison and a $5 million fine.
U.S. Attorney Carpenito and Acting Assistant Attorney General Cronan credited special agents of the FBI, under the direction of Special Agent in Charge Gregory W. Ehrie, with the investigation leading to today’s charges. They also thanked the U.S. Securities and Exchange Commission’s New York Regional Office, under the direction of Regional Director Marc P. Berger and Associate Regional Director Lara S. Mehraban, for its assistance.
The government is represented by Paul A. Murphy, Chief of the U.S. Attorney’s Office’s Economic Crimes Unit, Assistant U.S. Attorney Nicholas P. Grippo of the Economic Crimes Unit, Trial Attorney Leslie Lehnert of the Justice Department Criminal Division’s Money Laundering and Asset Recovery Section, and Assistant U.S. Attorney Sarah Devlin of the U.S. Attorney’s Office’s Asset Recovery Money Laundering Unit.
The charges and allegations contained in the complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
The post Sotirios Zaharis Charged in $300 Million Investment Fraud Scheme appeared first on The National Herald.