CEO of Virginia Health Care Technology Company Pleads Guilty to $30 Million Shareholder Fraud and

[nitpicker]

https://www.justice.gov/opa/pr/ceo-virginia-health-care-technology-company-pleads-guilty-30-million-shareholder-fraud-and-75

Department of Justice
Office of Public Affairs

FOR IMMEDIATE RELEASE
Friday, December 2, 2016

CEO of Virginia Health Care Technology Company Pleads Guilty to $30 Million Shareholder Fraud and $7.5 Million Employment Tax Fraud

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According to the plea agreement, statement of facts, and other court documents, in or about September 2000, Sreedhar Potarazu, 51, of Potomac, Maryland, an ophthalmic surgeon licensed in Maryland and Virginia, founded VitalSpring Technologies, Inc. (VitalSpring), a Delaware corporation. VitalSpring operated in McLean, Virginia and provided data analysis and services relating to health care expenditures. In or around the end of 2015, VitalSpring started doing business as Enziime LLC, a Delaware corporation. From its inception, Potarazu was VitalSpring’s Chief Executive Officer and President, and served on its Board of Directors.

As early as 2009, Potarazu provided materially false and misleading information to VitalSpring’s shareholders to induce more than $30 million in capital investments in the company. Potarazu represented on numerous occasions that the sale of VitalSpring was imminent, which would have resulted in profits for shareholders, and concealed that VitalSpring failed to account for and pay over more than $7.5 million in employment taxes to the IRS. For example, in 2014, Potarazu provided shareholders with a written summary of operating results that reflected VitalSpring’s 2013 revenues to be approximately $12.9 million when, in fact, the 2013 revenue was less than $1 million.
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Scheme to Defraud

From VitalSpring’s inception, but specifically from 2009 to the present, Potarazu solicited investments through in-person meetings, emails, telephone conference calls, webinars, and phone calls. From in or about 2009 through in or about 2016, Potarazu raised approximately $32 million from more than 160 victim investors.

Potarazu induced investments from shareholders by making false representations, concealing material facts, and telling deceptive half-truths about VitalSpring’s financial condition, tax compliance, and alleged imminent sale. Potarazu also caused someone to pose as a representative of a prospective buyer on shareholder conference calls to add legitimacy to his claims regarding VitalSpring’s imminent sale.

VitalSpring had not generated a profit since 2009. Nonetheless, Potarazu falsely represented to shareholders that VitalSpring’s financial position and profitability was improving from 2009 to 2015, and that VitalSpring had millions of dollars in cash reserves. To support his scheme, Potarazu presented fake bank statements to some shareholders that showed inflated balances.

Potarazu also concealed from shareholders that VitalSpring owed substantial employment tax to the IRS. Potarazu provided or caused to be provided false corporate income tax returns to some shareholders that overstated VitalSpring’s income and omitted the accruing employment tax liability.
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