Two Indian-Americans among 3 charged in alleged $300 million investment fraud scheme

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The former CEO, executive director, and CFO of a publicly traded health care services company were charged May 16, 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, Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division and U.S. Attorney Craig Carpenito announced.

Parmjit “Paul” Parmar, 48, of Colts Neck, New Jersey; and Ravi Chivukula, 44, of Freehold, New Jersey; as well as Sotirios “Sam” Zaharis, 51, of Weehawken, New Jersey, are charged by complaint with one count of conspiracy to commit securities fraud and one count of securities fraud.  FBI special agents arrested Parmar May 16, near his home.  afternoon before U.S. Magistrate Judge Leda Dunn Wettre in Newark, New Jersey federal court. Chivukula and Zaharis remain at large, according to a press release from the Justice Department.

The charges and allegations contained in the complaint are merely accusations, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

According to the complaint unsealed May 16, from May 2015 through September 2017, the defendants allegedly 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 company (Company A) traded publicly on the London Stock Exchange’s Alternative Investment Market.  To fund the transaction, the private investment firm put up approximately $82 million in equity, and a consortium of financial institutions provided another approximately $130 million in debt.  The scheme allegedly 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 press release says.  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 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 allegedly 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 accused 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; and
  • Made material misrepresentations and omissions to the private investment firm and others.

The alleged actions by the defendants 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, this year, Company A and numerous of its affiliated entities filed for bankruptcy, attributing the company’s financial demise, in large part, to the alleged fraud scheme.

Separately, the United States filed a separate civil complaint today seeking forfeiture of four properties that Parmar owns or controls, including a house on Colt’s Neck and three apartments in New York City.  The U.S. Securities and Exchange Commission filed a civil complaint May 16, against Parmar, Zaharis and Chivukula.

 

 

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