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Constellation Healthcare Technologies Inc. Bankruptcy Case
Former CEO Paul Parmar claims conspiracy, blames Chinh Chu, a former Blackstone senior executive

  (By a staff reporter) New York- Paul Parmar, the embattled Ex-CEO of now bankrupt Constellation Healthcare Technologies Inc, alleges he has been the victim of a sophisticated investor takeover scheme that has roots in profiting from a “fraudulent” bankruptcy.

Parmar of Colts Neck, NJ, along with former Constellation CFO Sotirios Zaharis and Ravi Chivukula, a former executive director of the company, was charged in May this year by the U.S. Securities and Exchange Commission with conspiracy to commit securities fraud and securities fraud. SEC charges against Paul &others included the scheme to falsely inflate Constellation’s value to induce an investment firm to buy his company.

Chinh Chu, a former Blackstone senior executive, purchased Constellation in 2017, through his investment firm CC Capital. Constellation filed for bankruptcy in March 2018, claiming that some of the businesses it had purchased while Parmar was in charge were fictitious. Parmar alleges in court documents that Chu pushed Constellation into bankruptcy and then rigged the subsequent auction of assets to his benefit, so he could purchase Constellation after bankruptcy proceedings at a fraction of the actual value. The SEC has launched a parallel civil action into Parmar and his associates. Separately, the United States has filed a civil complaint seeking forfeiture of four properties that Parmar owns or controls, including a house in Colt’s Neck, NJ and three apartments in New York City.

“There is more than what meets the eye,” says Parmar’s attorney Timothy Parlatore. “The direction and intent of Chinh Chu and CC Capital’s various court actions raise more questions than answers.”In court documents, Parlatore, says “rather than conducting a full, complete and independent investigation, the DOJ and SEC were hoodwinked by Chu into bringing these specious claims against Mr. Parmar.” Parlatore further explains the case against his client in what he believes involves a unique set of intriguing circumstances. To begin with, despite the government bringing a separate civil suit against Parmar; Parlatore says in court documents, that the DOJ is now surprisingly seeking a stay in the civil case on the theory that if the SEC were required to respond to a motion to dismiss by Parmar, their response would damage the “integrity” of the criminal prosecution.

“It is understandable that the Government is concerned that the more expansive rules of discovery that the civil rules permits would significantly decrease their chances of convicting Mr. Parmar because a full discovery process will help to establish that Mr. Chu is the true architect of the fraud, not Mr. Parmar,” Parlatore submitted in his brief to the US District Court in New Jersey. He also pointed out that it was highly implausible and strategically convenient that a highly sophisticated investor like Chinh Chu could spend $7 million on due diligence and then make an investment decision to acquire Constellation based just on a few inaccurate statements made very early in the process by Parmar, rather than the mountains of data that were subsequently provided. What Parlatore implied was how an investor could just rely on any management reports or documents after such an extensive due diligence?

In court papers, Parmar’s lawyers have also laid out what they believe is a critical omission on part of Chinh Chu. In the middle of the due diligence process, Constellation received a series of questions from a reporter at the Financial Times asking about the legitimacy of the acquisitions made earlier by Constellation. Once the Financial Times article was published, it discussed the empty shells, concluding that “The cat’s cradle of corporate entities and generalized opacity across Constellation’s operations could be seen as a red flag to potential investors and financial journalists alike.”

While such an article would normally cause a deal like this to be derailed or delayed to perform additional due diligence, Chinh Chu incredibly had the opposite reaction, demanding to immediately close the deal. Apparently, Chinh Chu felt no fiduciary duty to either the banks or his investors to investigate and assess the allegations raised in the article, court documents say.

Interestingly, just as reported in the Financial Times article, Parlatore says in court documents, that while Chinh Chu was alleging fraud in his court submission about Parmar’s empty shell companies, he conveniently failed to mention that subsequently, Parmar bought four more companies without raising any additional funds and the combined financials of these acquisitions were far greater than the “empty shells.”

“Chu wants the government and the world to focus on a selective time window where his allegations might look real, but in a larger context those allegations are baseless” Parlatore replied when asked to comment about the case.

Parlatore also pointed out that while Parmar was arrested on May 16, 2018, there had been no progress in the ensuing four months and that the Government had not yet obtained an indictment of Parmar. Although the time to file an indictment had been extended twice, no discussions have occurred, and the Government had made no offers to settle the case.
Parlatore said he is also seeking to dismiss the federal forfeiture claim against Parmar, and that Parmar’s bankruptcy counsel is working to dismiss adversary claims against him in bankruptcy court over the merger and the alleged fraud.

In the government’s forfeiture claim, Parlatore points out what he believes is gross misrepresentation. Although the government seeks forfeiture of four properties based on a theory that they represent the proceeds of illegal activity, amounting to securities fraud and money laundering, in court filings it is clearly established that three out of these four properties were purchased or refinanced prior to any alleged violation of US law.

At press time, representatives of CC Capital, and Chinh Chu did not immediately respond to email requests for comments.

Tags: Paul Parmar, Paul, Parmar, Constellation Healthcare Technologies Inc, Chinh Chu, Blackstone , Timothy Parlatore , Sotirios Zaharis, Ravi Chivukula



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