Gajwani of Connecticut also charged with tax evasion.
AB Wire
Rockwell Gajwani, 52, former CEO of a real estate company in Manhattan, New York, Manhattan Real Estate Company, has been charged with embezzling more than $1 million from his company, plus tax evasion. He was arrested in Darien, Connecticut.
Preet Bharara, the United States Attorney for the Southern District of New York, Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service, and Shantelle P. Kitchen, Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation, announced on Tuesday the arrest of Gajwani on charges of wire fraud, money laundering, and tax evasion, according to the Justice Department.
Bharara said: “As the chief executive officer of a Manhattan real estate company, Rockwell Gajwani was supposed to put the best interests of his company first. Instead, as alleged, he abused his position of authority to embezzle over a million dollars of company money. I thank the U.S. Postal Inspection Service and the IRS-CI for their work in this investigation.”
As alleged in the complaint unsealed in Manhattan federal court: From October 2011 through March 2013, Gajwani was the chief executive officer and president of Manhattan Real Estate Company. During this period, he took over $1 million in company funds to which he was not entitled by, among other means, making wire transfers from the company’s bank account to his personal bank account, writing company checks to himself, and making cash withdrawals from the company’s bank account.
To accomplish this scheme, among other means, Gajwani took steps to conceal his true salary and to conceal from the Manhattan Real Estate Company’s parent company the amount of money he had taken from the Manhattan Real Estate Company’s bank account.
In or about February 2012, Gajwani asked an employee of the Manhattan Real Estate Company (“Employee-1”) to reduce his salary to zero in the company’s payroll system, which Employee-1 did not do. Soon thereafter, Gajwani asked Employee-1 to reduce his salary to $2,000 biweekly and did not provide an explanation to Employee-1 for this request. Ultimately, Employee-1 complied with this request and caused Gajwani’s salary to be reduced in the payroll system from $26,923.07 on a biweekly basis – which reflects approximately GAJWANI’s agreed salary of $700,000 – to $2,000 on a biweekly basis.
Beginning in late 2012, the director of accounting for the Manhattan Real Estate Company (the “Director of Accounting”) asked Gajwani for details regarding his compensation on more than one occasion, and Gajwani repeatedly said he would get such details to her, but failed to do so. On another occasion, in connection with a request from the Parent Company for financial information, Gajwani told the Director of Accounting not to provide that information to the Parent Company.
To further conceal the funds he had taken from the Manhattan Real Estate Company, Gajwani directed employees of the Manhattan Real Estate Company to lump the compensation of all employees together in accounting materials provided to the Parent Company, so that Gajwani’s compensation would not be listed separately from the aggregate figure. He also directed certain employees of the Manhattan Real Estate Company not to communicate with employees of the Parent Company.
Over the course of his employment, Gajwani wrote himself over $940,000 in checks from the Manhattan Real Estate Company’s bank account, and wired over $1,700,000 to his personal bank account. Although some of these funds were purportedly for expenses, by the end of his employment Gajwani had taken over $1,300,000 more from the Manhattan Real Estate Company’s bank account than he was entitled to under his employment agreement.
Gajwani also concealed his fraud on the Manhattan Real Estate Company by laundering the proceeds of his fraud. Specifically, on two occasions in May 2012, he wrote checks to an employee of the Manhattan Real Estate Company (“Employee-2”) from the company’s bank account. Gajwani wrote “expenses” in the memo line of each check, although neither check was meant to pay company expenses, and instructed Employee-2 to write a check in return directly to Gajwani himself. Employee-2 did so on both occasions.
In this manner, Gajwani was able to secure over $30,000 in payments that he appeared to receive from Employee-2 but in reality were funds Gajwani had taken from the Manhattan Real Estate Company.
In addition to defrauding the Manhattan Real Estate Company and engaging in money laundering, Gajwani did not file tax returns or pay taxes for his legitimate salary or for the money he had secured through fraud. Ultimately, in or about July 2015, after he learned of a criminal investigation, Gajwani filed tax returns for calendar years 2011, 2012, and 2013. Each of those returns included false representations. For tax year 2011, the Federal Income Tax Return that Gajwani filed understated his actual income by more than $480,000, and included over $85,000 in false impermissible tax deductions. For tax year 2012, the Federal Income Tax Return that Gajwani filed included over $260,000 in false impermissible tax deductions. For tax year 2013, the Federal Income Tax Return that Gajwani filed underreported his actual income by $270,000.
Gajwani is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison; one count of money laundering, which carries a maximum sentence of 20 years in prison; and three counts of tax evasion, each of which carries a maximum sentence of five years in prison.