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Business Crimes Hotline
The former CEO of a pharmaceutical company was found guilty by a jury on eight counts of wire fraud affecting a financial institution for orchestrating a scheme that led to the collapse of one of Puerto Rico's biggest banks. Dr. Jack Kachkar, who formerly ran Inyx, Inc., was found guilty in front of Judge Graham of the Southern District of Florida for fraud that caused Westernbank to suffer over $100 million in losses, ultimately causing the bank to shutter.
From 2005 to 2007, Dr. Kachkar secured over $142 million in loans from Westernbank based on what he alleged were customer invoices, but which were actually fraudulent documents created by employees at Inyx. In addition, Dr. Kachkar misrepresented the value of other assets, including mines, which the bank also relied on as collateral. Inyx ultimately defaulted on the loan in 2007. Westernbank later closed in 2010, costing over 1500 employees their jobs, based on repercussions from losses connected to the Inyx default.
Dr. Kachkar was also found guilty of defrauding Mellon Bank for submitting a $3 million check that he knew was worthless. When Mellon Bank later asked for Dr. Kachker to return the money it had wired him as a provisional credit for the check, Dr. Kachkar refused to return $1 million.
Dr. Kachkar had previously been banned from serving as a director of any Irish company for five years after an Irish court determined he had acted irresponsibly with respect to the operation of a different pharmaceutical company.
After his arrest in 2016, the court, in a decision affirmed by the 11th Circuit, determined that Dr. Kachkar's ties to foreign governments and banks made him a flight risk, and ordered that he be held without bond pending his trial. Dr. Kachar had previously traveled to Russia and Libya, two countries without U.S. extradition agreements. The fact that the majority of Dr. Kachkar's proceeds from his fraud were unaccounted for also led the court to determine that he could have access to significant money, contributing to the decision that he represented a flight risk.
Prosecutors say that Dr. Kachkar used his ill-gotten gains to purchase a private jet, multiple homes, and fine jewelry. According to Charge Arvelo, a Homeland Security Investigations Special Agent, Dr. Kachkar “was responsible for one of the largest fraud schemes ever recorded in the banking business in Puerto Rico and he will pay the consequences.” Dr. Kachkar's sentencing will take place on April 30, 2019.
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Kate Monks is a Litigation & Dispute Resolution associate in Mayer Brown's Washington, DC office. she can be reached at [email protected].
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