The former CEO of a U.S. publicly-traded health care company has pleaded guilty to a conspiracy charge in connection with a complex scheme that duped a number of investors into financing a transaction to take the company private at a vastly inflated valuation.
In 2018, a federal grand jury in New Jersey indicted Parmjit “Paul” Parmar and several alleged co-conspirators (the company’s CFO and two directors) in connection with a scheme to artificially inflate the value of a U.S. company, Constellation Healthcare Technologies Inc., which was traded on the London Stock Exchange’s Alternative Investment Market (AIM).
U.S. authorities alleged that, between 2015 and 2017, the conspirators falsified bank records, created fake customer records and made other material misrepresentations to investors, causing them to value the company at more than US$300 million company for the purposes of the transaction. That enabled them to secure US$212.5 million in financing from a private investment firm (US$82.5 million) and a consortium of other financial institutions (US$130 million) to finance a transaction to take the company private.
Ultimately, the scheme collapsed and the company filed for bankruptcy in 2018.
Parmar and the others were subsequently charged with securities fraud, wire fraud and conspiracy to commit securities fraud. And, in a parallel action, the U.S. Securities and Exchange Commission (SEC) also filed charges against three of the company’s executives.
Now, Parmar has pleaded guilty to the conspiracy charge, which carries a maximum penalty of five years in prison and a US$250,000 fine.
As part of his plea deal, Parmar agreed to forfeit certain assets, and the court will order restitution, the U.S. attorney office for New Jersey reported.
The charges against the other three have not been proven and they are presumed to be innocent.