FOR
IMMEDIATE RELEASE
Wednesday, July 3, 2019
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.
U.S.
Attorney Ariana Fajardo Orshan of the Southern District of Florida, Assistant
Attorney General Brian A. Benczkowski of the Justice Department’s Criminal
Division, 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.
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. 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.
