They allegedly misrepresented their company’s finances to inflate its stock price.
Two top Indian American executives of a software and consulting firm have been arrested in the US for allegedly misrepresenting their company’s finances to inflate its stock price, a media report said on Thursday.
The 62-year-old Nandu Thondavadi, CEO of Schaumburg-based Quadrant 4 Systems, and 55-year-old Dhru Desai, its chief financial officer and chairman, were charged with wire fraud and certifying false financial reports related to two acquisitions and the settlement of a lawsuit against the company in 2013.
Thondavadi faces an additional charge of making false statements to the Securities and Exchange Commission in May during an investigation into the company’s financial practices.
Both appeared in Chicago federal court on Wednesday morning to hear the charges, which carry a maximum penalty of 20 years each for wire fraud and certifying false financial reports.
Their company, launched in 2010, has offices in seven states of India, including the cities Ahmedabad, Chennai, Hyderabad and Madurai. It provides software and consulting services to health care and education customers.
According to the financial filings, the firm reported $52 million in revenues and a net loss of $516,000 for 2015. As a publicly traded company, Quadrant 4 is required to provide a detailed report on its financial condition to the SEC on a quarterly and annual basis.
According to the complaint, the investigation team revealed that Thondavadi and Desai certified the reports even though they knew the documents did not fairly present the true financial condition of the company.
Federal authorities launched an investigation of the company earlier this year based on indications that the firm’s recent annual reports to SEC contained false information, the Department of Justice said in a statement.
When questioned by the SEC in May about some of the falsehoods, Thondavadia lied under the oath, the complaint states.