Former CEO, CFO And Directors Of Healthcare Services Company Indicted In Elaborate $300 Million Investment Fraud Scheme
Defendants Allegedly Inflated Company’s Value and Revenue to Defraud Investors
NEWARK, N.J. – The former CEO, CFO and two directors of a publicly traded healthcare services company were indicted today for 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 announced.
Parmjit Parmar, a/k/a “Paul Parmar,” 48; Sotirios Zaharis, a/k/a “Sam Zaharis,” 51; Ravi Chivukula, 44; and Pavandeep Bakhshi, 41, are charged in a three-count indictment with conspiracy to commit securities fraud, securities fraud, and wire fraud. Parmar, Zaharis, and Chivukula were first charged by complaint in May 2018. Bakhshi was charged with the same offenses in a separate criminal complaint in September 2018, which was unsealed earlier this week following his arrest at JFK Airport after he arrived from London. Zaharis and Chivukula remain fugitives.
According to documents filed in this case and statements made in court:
From May 2015 through September 2017, Bakhshi and conspirators Parmjit Parmar, a/k/a “Paul Parmar,” Sotirios Zaharis, a/k/a “Sam Zaharis,” and Ravi Chivukula 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.
To present a positive picture of the company’s financial wealth, the conspirators 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 conspirators 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 in September 2017, when the conspirators 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 conspiracy count with which the defendant is 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 twenty years in prison and a $5,000,000 fine.
The United States filed a criminal complaint against Parmar, Zaharis and Chivukula on May 16, 2018 for their roles in the scheme. Zaharis and Chivukula currently are fugitives. The United States also filed a separate civil complaint on the same date 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 filed a civil complaint on May 16th against Parmar, Zaharis and Chivukula.
U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge Gregory W. Ehrie, with the investigation which led to today’s charges. He 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, Money Laundering and Asset Recovery Section, Department of Justice, 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 indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.