Friday, October 23, 2020

South Florida Resident Responsible for the Collapse of One of Puerto Rico’s Largest Banks Sentenced to 30 Years Jail Time

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South Florida Resident Sentenced to 30 Years for $100 Million International Fraud Scheme that Led to the Collapse of One of Puerto Rico’s Largest Banks

A Key Biscayne, Florida, resident and the former CEO and Chairman of a now-bankrupt multinational pharmaceutical company was sentenced to 30 years in prison followed by five years of supervised release yesterday for his role his role in a $100 million scheme to defraud Westernbank of Puerto Rico (Westernbank). The losses triggered a series of events leading to Westernbank’s insolvency and ultimate collapse.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ariana Fajardo Orshan of the Southern District of Florida, Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), Special Agent in Charge Michael J. DePalma of IRS Criminal Investigation (IRS-CI) for Miami and Puerto Rico, Special Agent in Charge Iván J. Arvelo of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) in San Juan and Special Agent in Charge Douglas A. Leff of the FBI’s San Juan, Puerto Rico Field Office made the announcement.

Jack Kachkar, 56, was sentenced by U.S. District Judge Donald L. Graham of the Southern District of Florida, who also presided over the trial in this case.

Judge Graham also ordered the defendant to pay $103,490,005 in restitution to the FDIC, as receiver for Westernbank.

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Kachkar was convicted on Feb. 4, 2019, after a three-week trial, of eight counts of wire fraud affecting a financial institution.

According to evidence presented at trial, from 2005 to 2007, Kachkar served as chairman and CEO of Inyx Inc., a publicly traded multinational pharmaceutical manufacturing company.

Beginning in early 2005, Kachkar caused Westernbank to enter into a series of loan agreements in exchange for a security interest in the assets of Inyx and its subsidiaries.  Under the loan agreements, Westernbank agreed to advance money based on Inyx’s customer invoices from “actual and bona fide” sales to Inyx customers, the evidence showed.

The trial evidence showed that Kachkar orchestrated a scheme to defraud Westernbank by causing numerous Inyx employees to make tens of millions of dollars worth of fake customer invoices purportedly payable by customers in the United Kingdom, Sweden and elsewhere.

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Kachkar caused these invoices to be presented to Westernbank as valid invoices.

Kachkar made false and fraudulent representations to Westernbank executives about purported and imminent repayments from lenders in the United Kingdom, Norway, Libya and elsewhere in order to lull Westernbank into continuing to lend money to Inyx, the evidence showed.

In fact, these lenders had not agreed to repay Westernbank’s loan.  Kachkar made false and fraudulent representations to Westernbank executives that he had additional collateral, including purported mines in Mexico and Canada worth hundreds of millions of dollars, to induce Westernbank to lend additional funds, the evidence showed.

In fact, this additional collateral was worth barely a fraction of that represented by Kachkar.

During the course of the scheme, Kachkar caused Westernbank to lend approximately $142 million, primarily based on false and fraudulent customer invoices.

The evidence showed that the defendant diverted tens of millions of dollars for his own personal benefit, including for the purchase of, among other things, a private jet, luxury homes in Key Biscayne and Brickell, Miami, luxury cars, luxury hotel stays, and extravagant jewelry and clothing expenditures.

In or around June 2007, Westernbank declared the loan in default and ultimately suffered losses exceeding $100 million on the Inyx loans.

According to trial evidence, these losses later triggered a series of events leading to Westernbank’s insolvency and ultimate collapse.

At the time of its collapse, Westernbank had approximately 1,500 employees and was one of the largest banks in Puerto Rico.

This case was investigated by the FDIC-OIG, IRS-CI, HSI and FBI.  The Department of Justice’s Office of International Affairs provided significant support in the investigation.

The case is being prosecuted by Assistant U.S. Attorney Michael N. Berger of the Southern District of Florida and Trial Attorney Michael O’Neill of the Criminal Division’s Fraud Section.

The Department acknowledges and appreciates the substantial assistance of the Royal Canadian Mounted Police and the U.K. Metropolitan Police.

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