New Jersey Biotech Companies And Former Executive Ordered To Pay $11M To Resolve Civil Fraud Suit
By: Christopher A. Iacono
Thomas J. Fagan and the two companies he ran have been ordered to pay more than $11 million in restitution and civil penalties to resolve a civil fraud suit brought by New Jersey State authorities. Fagan, President and CEO of Energex Systems, is also permanently barred from selling securities in New Jersey, and from holding controlling interest in or serving as an officer or director of any company that issues securities in New Jersey, including his former companies.
Earlier in May 2013, Fagan was indicted by a New Jersey Grand Jury in connection with an alleged scheme that defrauded nearly 800 investors of $9.5 million by selling unregistered stock in Energex Systems, Inc. The grand jury indictment charges Fagan with misapplication of entrusted property, theft, money laundering, and corporate misconduct. He is also charged with three counts of failing to file personal income tax returns and filing a fraudulent state tax return in 2010. The charges stemmed from an investigation by the state Division of Criminal Justice Financial & Computer Crimes Bureau, which received a referral from New Jersey Bureau of Securities. The Bureau filed the civil suit against Fagan and his companies in July 2011.
Fagan allegedly commingled investor funds among the two companies, stealing or misappropriating more than $230,000 for his personal use and enrichment, including withdrawals of tens of thousands of dollars for casino gambling. According to the indictment, Fagan often used the money for overseas vacations and gambling junkets to Atlantic City and Las Vegas. The indictment also alleges Fagan made $114,031 in cash withdrawals for personal use from accounts of Energex and Arbios Systems, including withdrawals made in Atlantic City and Las Vegas. The indictment also alleges that Fagan wrote Energex checks to himself in 2008 totaling $117,772.
This case highlights the New Jersey Attorney General’s continuing initiative to investigate and prosecute financial crimes in the State.