South Florida Resident Convicted of $100 Million International Fraud Scheme ((PR bank collapse))

https://www.justice.gov/usao-sdfl/pr/south-florida-resident-convicted-100-million-international-fraud-scheme-led-collapse

Department of Justice
U.S. Attorney’s Office
Southern District of Florida

FOR IMMEDIATE RELEASE
Tuesday, February 5, 2019

South Florida Resident Convicted of $100 Million International Fraud Scheme that Led to Collapse of One of Puerto Rico’s Largest Banks

A Key Biscayne, Florida resident was found guilty yesterday by a federal jury for 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. The defendant was also convicted of a $3 million scheme to defraud Mellon United National Bank of Miami (Mellon Bank).
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Jack Kachkar, 55, was convicted of eight counts of wire fraud affecting a financial institution after a three-week trial before U.S. District Judge Donald L. Graham of the Southern District of Florida. Kachkar is scheduled to be sentenced by Judge Graham on April 30, 2019.
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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.

In addition, the evidence showed, Kachkar knowingly deposited a $3 million check at Mellon Bank from the purported sale of his private jet. At the time of its deposit, based on the evidence presented, Kachkar knew that the check was worthless. In fact, the defendant agreed to sell his plane to a different buyer. After receiving a provisional credit for the check from Mellon Bank, the defendant wired out all of the provisional credit, including a $1 million wire to Kachkar’s personal account in Canada. Upon Mellon Bank’s request to reverse this $1 million wire, Kachkar refused to do so, resulting in at least a $1 million loss to Mellon Bank, the evidence showed.
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