Florida Man’s $100 Million Fraud Led To Bank Collapse In PR: Feds
MIAMI, FL – A former CEO of a specialty pharmaceutical company whose opulent Miami lifestyle included a private jet and at least two luxury homes was found out more than a decade ago in connection with a bogus $ 100 million billing scheme that sparked a series Found guilty of federal fraud According to federal prosecutors in Miami, events culminated in the collapse of Westernbank, one of the largest banks in Puerto Rico.
Fifty-five-year-old Jack Kachkar was convicted of eight wire fraud cases involving a financial institution after a three-week trial before Donald L. Graham, US District Judge in Miami. Kachkar is due to be sentenced on April 30th.
In addition to Western Bank, Kachkar was also convicted of fraud against Mellon United National Bank of Miami in connection with a $ 3 million program.
“Jack Kachkar developed a massive fraud program that led directly to the failure of a large Puerto Rican bank with more than 1,500 employees,” said Assistant Attorney General Brian A. Benczkowski in Washington, DC
Prosecutors said Kachlar had diverted tens of millions of dollars for personal gain, including buying a private jet, luxury real estate in Key Biscayne and Miami’s trendy Brickell neighborhood, luxury cars, expensive hotel stays, and extravagant spending on jewelry and clothing.
“Jack Kachkar’s fraud has caused considerable damage to the 1,500 employees of the Western Bank and the people of Puerto Rico,” added US attorney Ariana Fajardo Orshan in Miami. “The US Attorney’s Office continues to pursue the prosecution of individuals and companies who use Miami and other communities in South Florida as a base for running multinational fraud programs.”
The fraud occurred during Kachkar’s time as chairman and CEO of Inyx Inc., a publicly traded multinational pharmaceutical company in New York.
“Beginning in early 2005, Kachkar prompted Westernbank to enter into a series of loan agreements to maintain a security interest in the assets of Inyx and its subsidiaries,” the federal prosecutor said. “As part of the loan agreements, Westernbank agreed to advance money from ‘actual and bona fide’ sales to Inyx customers based on Inyx’s customer invoices.”
Kachkar ordered Inyx employees to deceive Westernbank by creating fake customer invoices worth tens of millions of dollars from customers in the UK, Sweden and other countries.
“Kachkar made sure that these bills were presented to Westernbank as valid bills,” said the prosecutor. “Kachkar made false and fraudulent representations to Western Bank executives about alleged and impending repayments from lenders in the UK, Norway, Libya and elsewhere in order to get Western Bank to continue lending money to Inyx.”
Prosecutors said Kachkar made false and fraudulent statements to Western Bank executives that he had additional collateral, including hundreds of millions of dollars in mines in Mexico and Canada.
“In fact, this additional security was hardly worth a fraction of the security represented by Kachkar,” said the prosecutor. “Over the course of the program, Kachkar induced Western Bank to lend approximately $ 142 million, largely due to false and fraudulent customer invoices.”
Regarding Mellon Bank, prosecutors said Kachkar had deposited with Mellon Bank a check for $ 3 million from the sale of his private jet that he knew was worthless.
“In fact, the defendant agreed to sell his aircraft to another buyer,” said prosecutors. “After the defendant received preliminary credit for the check from Mellon Bank, he transferred all preliminary credit, including a $ 1 million transfer, to Kachkar’s personal account in Canada. At Mellon Bank’s request, this transfer from Kachkar refused to reverse $ 1 million. The evidence showed Mellon Bank lost at least $ 1 million. “
In a Federal Deposit Insurance Corporation press release dated April 30, 2010, officials said Western bank’s 46 branches and their deposits in Puerto Rico would be taken over by Banco Popular de Puerto Rico in San Juan.
As of December 31, 2009, Western Bank Puerto Rico had total assets of approximately $ 11.94 billion and total deposits of $ 8.62 billion, the FDIC said in the press release.
The investigation into Kachkar was conducted by the Inspectorate General of the Federal Deposit Insurance Corporation. the IRS Criminal Investigation for Miami and Puerto Rico; Investigations by the US Immigration and Customs Bureau of Homeland Security and the FBI Field Office in San Juan.
“Today’s verdict holds the defendant responsible for orchestrating fraudulent systems that have resulted in more than $ 100 million in losses to insured institutions and the FDIC as beneficiaries,” added Inspector General Jay N. Lerner, Inspector General of the Federal Deposit Insurance Corporation added.
“The greed of this defendant was strong enough to destroy a bank and bring about the jobs of about 1,500 hard-working citizens of Puerto Rico with it,” said FBI special agent in charge, Douglas A. Leff. “The FBI thanks the US Attorney’s Office for sending an equally strong message that most fraud programs will ultimately lead to a prison cell.”
The case is being prosecuted by US assistant attorney Michael N. Berger of the southern Florida district and trial attorney Michael O’Neill of the Criminal Division’s Fraud Division.
Miami Federal Courthouse photo by Paul Scicchitano