An Indian-American medical doctor-cum-entrepreneur was sentenced to 119 months and 29 days in prison July 19, for defrauding his former company’s shareholders and for failing to account for and failing to pay employment taxes.
Sreedhar Potarazu, 51, of Potomac, Maryland went to the extent of employing someone to act as a buyer, to make shareholders believe his company was doing way better than it actually was, according to investigators.
In addition to the term of prison imposed, U.S. District Court Judge Gerald Bruce Lee ordered Potarazu to serve three years of supervised release, and to pay $49,511,169 in restitution to the shareholders and $7,691,071 to the IRS. He will also forfeit several homes, vehicles, and bank accounts, according to a July 19 press release from the Justice Department. He was remanded into custody.
According to documents filed with the court, Potarazu, an ophthalmic surgeon licensed in Maryland and Virginia, founded VitalSpring Technologies Inc., a Delaware corporation, in or about September 2000 and was the company’s CEO, president, and served on its Board of Directors. VitalSpring operated in McLean, Virginia and provided data analysis and services relating to health care expenditures. Around the end of 2015, VitalSpring started doing business as Enziime LLC, a Delaware corporation.
Prosecutors said that from at least 2008, Potarazu provided materially false and misleading information to VitalSpring’s shareholders to induce more than $49 million in capital investments in the company. He presented the company as financially successful and on the bring of being sold, quoting major profits when in reality he failed to account for and pay over more than $7.5 million in employment taxes to the IRS. For example, in 2014, Potarazu gave a written summary to shareholders claiming the company’s revenues in 2013 were to the tune of $12.9 million when, in fact, the 2013 revenue was less than $1 million.
“Like a director employing actors and props on a stage, Sreedhar Potarazu arranged for an imposter to pose as a buyer, provided a link to a bogus website and supplied fraudulent balance sheets, phony bank statements and false tax returns to convince VitalSpring investors and potential buyers that the company was financially healthy and up-to-date on its taxes,” said Acting Deputy Assistant Attorney General Goldberg, in a press release.