South Asian Insider
Paul Parmar of Constellation Healthcare fights back with several lawsuits against Chinh Chu
Dec 14, 2018: EDISON, NJ: Lawyers for Paul Parmar, the embattled ex-CEO of bankrupt Constellation Healthcare Technologies (CHT), have filed a civil lawsuit against Chinh Chu, a former Blackstone senior executive, who purchased Constellation last year, through his investment firm CC Capital. The case filed in US District Court in New Jersey under the Racketeer Influenced and Corrupt Organizations Act, commonly referred to as the RICO Act, names Chin Chu and several of his associates as defendants. The lawsuit alleges Parmar has been the victim of a sophisticated investor’s 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. Parmar’s charges included the scheme to falsely inflate Constellation’s value to induce an investment firm to buy his company. 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. In the recent RICO filing, Parmar cites Chinh Chu and his associates of CC Capital for their unlawful and corrupt actions as part of an ongoing scheme to unlawfully enrich themselves at Parmar’s expense. Court documents further allege that Chinh Chu and his associates have planned, and executed a large, complex and brazen fraudulent scheme with the target objective of artificially devaluing and, ultimately, stealing valuable assets belonging to Parmar, namely his ownership interest in a profitable medical billing company, Constellation Healthcare Technologies, through a pattern of racketeering activity that is a violation of various state and federal statutes. Beginning in January 2016, according to the RICO filing by Parmar, Chinh Chu and his associates, on behalf of CC Capital, commenced a plan to acquire a controlling interest in Constellation and deregistering CHT's stock with the AIM in a “going private” transaction. The proposed transaction would result in the CHT Group becoming privately held corporations with 51% of CHT's stock being owned by CC Capital controlled entities and the remaining 49% being owned by Parmar. Because Parmar was considered part of the buyers' group, he was recused from decision making on CHTs behalf for the transaction during the negotiation and due diligence process. During the due diligence process, Chinh Chu and his associates discovered vulnerabilities in CHT's record keeping that they could exploit after consummating, court documents allege. Specifically, Chinh Chu and his associates discovered that three subsidiaries that had been formed for the purpose of purchasing new subsidiaries were actually empty shell corporations with little to no customers, revenue, or value. While the empty shells did not have any significant effect on the value of CHT and certainly did not cause any valuation models to show an artificial inflation of the value, the true value of this information was its value to Chinh Chu as damaging material that could be used against CHT and its officers for blackmail, court documents allege. “The techniques employed by Defendants is reminiscent of Russian political strategies of using compromising materials or "Kompromat" to control or destroy political enemies,” Parmar’s attorney Timothy Parlatore, alleges in court documents. Parlatore cites three scenarios in court filings where Chinh Chu could use the Kompromat to strong-arm a deal at a significantly reduced price, while easily fending off potentially higher bidders under the threat of revealing what they knew. Chinh Chu could also use his relationships with the banks and leverage over CHT's officers to have the deal primarily funded through bank financing and, moreover, put the financing on CHT itself. Thus, CC Capital would get all of the benefit of the financing, but none of the liability. Although the deal called for CC Capital to get a 51% interest in CHT, court filings say, Chinh Chu and his associates could use the Kompromat as leverage after closing to force out the officers and minority shareholders to turn their 51% into 100% without paying any additional compensation. If all else failed and the leverage failed to produce the desired results, court filings allege, Chinh Chu and his associates could release the Kompromat and sideline CHT's leadership and Parmar, while taking advantage of the unique financing structure to put CHT into bankruptcy and steal all the company's assets. When Parmar refused to go along with Chinh Chu’s corrupt plan to steal the remaining 49% of CHT from Parmar and his associates, he was forced out. John Altorelli, Chinh Chu’s personal attorney and a Defendant in the RICO case, court documents allege, began to take an active role in Defendants’ illegal schemes after closing and was Chu's point man for various attempts to threaten and extort Parmar, as well as to coordinate and oversee the filing of a fraudulent bankruptcy proceeding that Defendants used to steal all of the assets of CHT for a fraction of their actual value, while leaving the banks with mountains of uncollectible debt and Parmar with zero consideration for their valuable assets that were taken from them. Chinh Chu and his associates first tried to threaten and extort Parmar, according to court filings, into simply forfeiting his interest in CHT to the them. These threats included two thinly veiled death threats, it is alleged. After these intimidation tactics failed to produce Parmar's compliance, Chinh Chu and his associates launched a new plan to permanently sideline him. Chinh Chu and his associates, allege court documents, illegally gained access to Parmar's personal email communications and used them to create a false narrative around the Kompromat that could be presented to law enforcement officials from the Department of Justice, Federal Bureau of Investigations and U.S. Attorney's Office for the District of New Jersey for the purpose of causing them to arrest Parmar, while concealing Chinh Chu’s own criminal activity. Attorney Parlatore further explains in the court filing that in a classic case of half-truths or deception through strategic cropping, Chinh Chu presented DOJ with a select few reports and documents that would mislead them into believing that Parmar was the architect of a fraudulent scheme. “Allowing DOJ to see the entire picture would not have served Defendants' corrupt purpose and would have actually put the DOJ's crosshairs on the Defendants themselves,” Parlatore explained. “So, just like cropped photos that can mislead for their lack of larger context, Defendants withheld a much larger cache of documents that would have revealed to the DOJ a much larger scheme and a much different set of criminal defendants.” After Parmar was arrested, the funds from the going private were seized, and Parmar was remanded to the Essex County Correctional Facility in NJ. Chinh Chu and his associates actively participated in ensuring Parmar's remand by providing an anonymous and knowingly false “tip” to the FBI that Parmar intended to flee the country, it is alleged in court documents. While Parmar was incarcerated, Chinh Chu instituted a fraudulent bankruptcy proceeding for CHT and its subsidiaries, coordinated by Chu and Altorelli, the RICO filing alleges. After appealing the denial of bail and demonstrating the falsehood of the anonymous “tip,” Parmar was released and, finally able to access his files and meaningfully participate in his own defense, launch a counter-attack. Parmar has filed motions to dismiss two civil lawsuits that had been brought as companion cases to his criminal case, as well as cross-claims in a bankruptcy adversary proceeding. In these filings, Parmar demonstrated, with significant documentary exhibits, that it was Chinh Chu who had committed criminal acts, not Parmar. Parmar’s lawyers have also filed an emergency application for a Preliminary Injunction and Temporary Restraining Order to stop Chinh Chu and his associates’ ongoing pattern of alleged illegal activity, which Parmar says has now escalated to making death threats against members of his family, including his niece and nephew, who are students in high school and college, respectively. At press time, representatives of CC Capital, and Chinh Chu did not immediately respond to requests for comments.
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