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So. Fla. resident convicted of $100M fraud scheme that toppled Westernbank

A Key Biscayne, Florida resident was found guilty by a federal jury for his role in a $100 million scheme to defraud Westernbank of Puerto Rico. The losses triggered a series of events leading to Westernbank’s insolvency and ultimate collapse in 2010. 

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.  

“Jack Kachkar engineered a
massive fraud scheme that led directly to the failure of a major Puerto Rican
bank with more than 1,500 employees,” said Assistant Attorney General Brian A.
Benczkowski of the Justice Department’s Criminal Division. 

“I want to commend the
prosecutors and our law enforcement partners for their tireless work
investigating this complex case and holding the defendant to account for these
crimes,” he said.

“Jack Kachkar’s fraud caused
substantial harm to the 1,500 employees of Westernbank and the people of Puerto
Rico,” said U.S. Attorney Ariana Fajardo Orshan of the Southern District of
Florida.

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. 

“Today’s verdict holds the
defendant accountable for orchestrating fraudulent schemes that resulted in
more than $100 million in losses to insured institutions and the FDIC as
receiver,” said Inspector General Jay N. Lerner of the Federal Deposit
Insurance Corporation Office of Inspector General (FDIC-OIG). 

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.  He 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. 

The 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 in 2010. 

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This story was written by our staff based on a press release.

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