Two Indian origin Chicago-area businessmen have been accused by the Securities and Exchange Commission for alleged accounting fraud. The charges include the information technology company Quadrant 4 System Corp (QFOR) where they served formerly as top executives. The fraud scheme had allegedly misled the investors and allowed the two executives to siphon off millions for their personal benefit, says the Securities and exchange Commission complaint filed June 29.
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The charges, filed at the U.S. District Court for the Northern District of Illinois, allege that former chief executive officer Nandu Thondavadi and former chief financial officer Dhru Desai had allegedly stole more than $4 million from the Schaumburg, Illinois-based QFOR over a five-year period. The former executives are alleged to have caused QFOR to understate its liabilities and inflate its revenues and assets, evading scrutiny by lying to the company’s auditors and providing them with forged and doctored documents.
According to the SEC’s complaint, the alleged scheme had continued until November 2016, when Thondavadi and Desai were arrested and criminally charged with fraud. QFOR announced their resignations in December 2016 and disclosed that the company’s financial reports could no longer be relied upon and required a restatement.
The charges include fraud, falsifying books and records, lying to auditors, falsely certifying QFOR’s filings and aiding and abetting QFOR’s alleged violations.
In a parallel action, the U.S. Attorney’s Office for the Northern District of Illinois had announced additional criminal charges on June 30, against Thondavadi and Desai, including the charges that they had allegedly attempted to obstruct the SEC’s investigation, lied to the SEC under oath and paid two individuals to lie to the SEC in the course of its investigation.
“As alleged in our complaint, Thondavadi and Desai perpetrated a multi-faceted scheme to mislead investors about QFOR’s financial condition and secretly enrich themselves,” David Glockner, director of the SEC’s Chicago Regional Office, said.
The SEC’s complaint charges the company, QFOR, with filing false and misleading quarterly, annual and other reports, failing to make and keep accurate books and records and internal accounting control failures.
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Subject to court approval, and without admitting or denying the allegations, QFOR had consented to an order to permanently enjoin the company from further fraud, reporting, books and records and internal control violations. The court will determine at a later date whether disgorgement or a financial penalty should be imposed against QFOR.
The SEC’s complaint seeks injunctions and return of the allegedly ill-gotten gains plus interest and penalties against the company and the former executives as well as officer-and-director bars against Thondavadi and Desai. The investigation is continuing.
By Premji
