In September 2016, Jack Kachkar, the former chair and Chief Executive Officer of the pharmaceutical company Inyx Inc., made his first court appearance in response to an indictment charging him with eight counts of federal wire fraud. The indictment alleges that he engaged in a scheme to defraud Westernbank Puerto Rico to the tune of more than 100 million dollars over a period of two years. The criminal indictment against Kachkar was filed in August 2016 and was kept under seal until it was recently released.
Alleged Scheme to Defraud Bank
The scheme reportedly involved Kachkar and Inyx taking out loans and lines of credit from the bank using fake Inyx customer invoices as collateral and misrepresenting the value of assets pledged as collateral. The government contends that Westernbank was induced to continue to lend money to Inyx with false promises that new sources of credit were in the works through deals with Credit Suisse, The Goldman Sachs Group, and a son of Moammar Quaddifi. No deals were concluded and as a result, Inyx did not repay the debt. Ultimately, this played a large role in the subsequent collapse of Westernbank, formerly one of the largest banks in Puerto Rico.
Charged with Using Funds for Personal Purchases
Dr. Kachkar is also charged with using nearly 25 million of the loan proceeds for his own personal purchases. The indictment states that he bought “multiple high-end real estate properties in Miami, luxury vehicles and a private jet.” The federal authorities also charged him with misappropriating another $9.6 million which ended up in the account of one of his associates.
Related Civil Litigation
Kachkar, a 53 year old Key Biscayne resident, headed the specialty pharmaceutical company, Inyx, Inc., from 2005 to 2007 after a career in medical publishing and running a Canadian pharmaceutical company. In 2007, Inyx filed for bankruptcy. In connection with that filing, Inyx sued Westernbank claiming that the bank had blocked the flow of customer funds to the drug company which prevented Inyx from paying its debts. That suit also charged that Westernbank was liable for $500 million in damages. The Federal Deposit Insurance Corporation took over the failed bank in 2010 and a tangle of related civil litigation continued, dealing with charges and counter-charges involving Inyx, its officers and directors and D & O insurers.
Meaning of Wire Fraud
Wire fraud is a crime that occurs when someone intentionally and voluntarily uses an instrument of interstate commerce, such as a telephone or other electronic communication, as part of a scheme to defraud someone of something of value, property or money. Wire fraud cannot be an accident; the prosecutors have to show intent. Typically, proof that actual harm occurred to a victim is one indication of the required intent on the part of the accused. Statements, conduct and the over-all operation of the fraudulent scheme may also provide evidence of intent. Wire fraud that affects a financial institution, as alleged against Kachkar, is punishable by substantial fines of up to $1,000,000 and prison time of up to 30 years.
Neither Kachkar nor his attorneys commented on the recent Southern District of Florida indictment or on his initial court appearance.
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