Fraud Friday – $100M Florida Fraud Leads to Bank Failure

February 15, 2019

By Dominic Bartolone
Contributing Editor, Fraud Friday

Fraud Friday – $100M Florida Fraud Leads to Bank Failure

An eccentric businessman who hobnobbed with Miami’s elite is headed to federal prison after being found guilty of fraud on a financial institution. Jack Kachkar, 55, former CEO of Inyx, a specialty pharmaceutical company in Miami, perpetrated a fake invoice scheme over a decade ago that contributed to the failure of a prominent Puerto Rican bank.

According to prosecutors, Kachkar lived the high-life, owning a private jet, and luxury homes in Key Biscayne and Miami’s glitzy Brickell district. Following a three-week jury trial, he was convicted on eight counts of wire fraud affecting a financial institution.

Kachkar ran a $100 million fraudulent invoice scheme that triggered events that resulted in the failure of Westernbank, one of the largest banks in Puerto Rico at the time, where over 1500 employees lost their jobs.

Besides Westernbank, Kachkar was also convicted of a scheme to defraud Mellon United National Bank of Miami of $3 million.

Court documents show that in 2005, Kachkar got Westernbank to enter into a series of loans in exchange for an interest in the assets of Inyx and its subsidiaries. The loan agreements stipulated that money would be advanced based on the purchase orders of Inyx’s “actual and bona fide” customers and potential sales to other clients.

Kachkar orchestrated a scheme where Inyx employees would create phony invoices detailing tens of millions in orders from non-existent overseas customers, which were then presented to Westernbank as valid sales contracts.

Prosecutors said “Kachkar caused these invoices to be presented to Westernbank as valid invoices,” and “made false and fraudulent representations to Westernbank executives about purported and imminent repayments from lenders in the United Kingdom, Norway, Libya and elsewhere to lull Westernbank into continuing to lend money to Inyx.”
Kachkar reportedly told Westernbank officials that he held additional assets, including mines in Mexico and Canada, which were worth hundreds of millions. In court, prosecutors said that the assets were worth only a fraction of what Kachkar claimed and that during the course of the scheme, Kachkar was able to borrower over $140 million, primarily based on the fake documents presented to the bank.

In dealing with Mellon Bank, Kachkar deposited a $3 million check, purportedly from the sale of his private jet, and requested a credit line from the bank. Mellon subsequently offered Kachkar a provisional credit line, where he then transferred out $1 million to his personal account in Canada.

Mellon Bank, upon discovering that the private jet was virtually worthless, attempted to reverse the $1 million wire transfer, which Kachkar refused, resulting in a loss of $1 million to the bank.
Not long after the losses were exposed, Westernbank Puerto Rico and its 46 branches, now in trouble financially, were eventually assumed by Banco Popular de Puerto Rico.

“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,” says Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation Office of Inspector General.

Jack Kachkar is scheduled to be sentenced on April 30.