Two Indian-Americans in Chicago charged with alleged accounting fraud

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Two Chicago-area businessmen of Indian origin have been accused by the Securities and Exchange Commission for alleged accounting fraud. The charges also include the information technology company Quadrant 4 System Corp (QFOR) where they served formerly as top executives. The fraud scheme allegedly misled investors and allowed the two executives to siphon millions for their personal benefit, says the Securities and exchange Commission complaint filed June 29.

The charges, which were filed at the U.S. District Court for the Northern District of Illinois, allege that former chief executive officer Nandu Thondavadi and former chief financial officer Dhru Desai allegedly stole more than $4 million from Schaumburg, Illinois-based QFOR over a nearly five-year period. The former executives also are alleged to have caused QFOR to understate its liabilities and inflate its revenues and assets, evading scrutiny by lying to the company’s auditors and providing them with forged and doctored documents.

According to the SEC’s complaint, the alleged scheme continued until November 2016, when Thondavadi and Desai were arrested and criminally charged with fraud.  QFOR announced their resignations in December 2016 and disclosed that the company’s financial reports could no longer be relied upon and required a restatement.

The charges include fraud, falsifying books and records, lying to auditors, falsely certifying QFOR’s filings, and aiding and abetting QFOR’s alleged violations.

In a parallel action, the U.S. Attorney’s Office for the Northern District of Illinois announced additional criminal charges June 30, against Thondavadi and Desai, including charges that they allegedly attempted to obstruct the SEC’s investigation, lied to the SEC under oath, and paid two individuals to lie to the SEC in the course of its investigation.

“As alleged in our complaint, Thondavadi and Desai perpetrated a multi-faceted scheme to mislead investors about QFOR’s financial condition and secretly enrich themselves,” David Glockner, director of the SEC’s Chicago Regional Office, is quoted saying in a press release.

The SEC’s complaint charges the company, QFOR, with filing false and misleading quarterly, annual, and other reports, failing to make and keep accurate books and records, and internal accounting control failures.

Subject to court approval, and without admitting or denying the allegations, QFOR consented to an order to permanently enjoin the company from further antifraud, reporting, books and records, and internal control violations.  The court will determine at a later date whether disgorgement or a financial penalty should be imposed against QFOR.

The SEC’s complaint seeks injunctions and return of the allegedly ill-gotten gains plus interest and penalties against the company and the former executives as well as officer-and-director bars against Thondavadi and Desai. The investigation is continuing.