The former executives of a now-defunct health technology company are facing criminal charges for what prosecutors are calling an “elaborate” fraud scheme that bilked investors out of more than $300 million.
In the criminal complaint filed Wednesday by the U.S. Attorney's Office in New Jersey, former CEO of Constellation Healthcare Technologies Inc. Parmijit “Paul” Parmar was charged with orchestrating a scheme to defraud an investment firm in a go-private transaction. He was charged alongside former Chief Financial Officer Sotirios “Sam” Zaharis and Executive Director Ravi Chivukul.
Constellation Healthcare, which filed for bankruptcy in March, is not named in the criminal complaint, but a parallel complaint (PDF) filed by the Securities and Exchange Commission (SEC) on Wednesday said Constellation and its executives falsified finical information in order to drive up the company’s value.
Federal prosecutors also filed a civil complaint (PDF) to seize four properties owned by Parmar.
Based in Houston, Texas, Constellation Healthcare at one time provided revenue cycle management technology, integrating data from EHRs to streamline claims processing.
Federal prosecutors alleged that the executives created fictitious companies that Constellation allegedly acquired, and then falsified bank records for those companies along with fake customer accounts to make it appear the company brought in more revenue than it did. As part of the go-private transition, one private investment firm based in New York sunk $82 million into the company and a consortium of financial lenders added $130 million in loans.
The company was eventually valued at nearly $309.4 million when the transaction was finalized on January 20, 2017. Nine months later, the scheme was discovered and the executives resigned, prompting the company to file for bankruptcy.