- Investors consider subpoena to gain access to information
- Judge's interest piqued by reports in Indian newspaper
Among the more than 11.5 million financial and legal records leaked from a Panama law firm may be clues that help U.S. regulators trying to track millions of missing dollars in a securities fraud case.
Investors, the Securities and Exchange Commission and a New York judge say the records might provide new leads to where Chetan Kapur, the former managing director of New York-based ThinkStrategy Capital Management, stashed his money. Kapur has been sitting in a federal lockup near a dingy strip of Brooklyn waterfront since July, claiming he’s broke and can’t pay $10 million in securities fraud judgments.
Getting access to the papers will be a challenge. The International Consortium of Investigative Journalists, which holds the documents, has said it won’t share them voluntarily with the U.S. The investors may ask a judge to order them turned over.
The leaked documents exposed the holdings of politicians, celebrities and drug traffickers, leading to the resignation of Iceland’s prime minister. The documents, known as the Panama Papers, came from the law firm Mossack Fonseca, which helped set up anonymous shell companies, according to the ICIJ.
“Any thoughts to what, if any tools we have available to again access to the Panama Papers as they pertain to Mr. Kapur and his millions?” U.S. District Judge Paul Engelmayer asked lawyers at a hearing this month.
Jason Solotaroff, a lawyer representing investors who won a $4.8 million fraud judgment against Kapur, said he might ask a federal judge in Washington to issue a subpoena for ICIJ’s records, while the SEC said it’s monitoring the group’s website for further disclosures.
Engelmayer’s interest in the papers was piqued after the Financial Express, a newspaper in India which participated in the project, said in an April 8 report that it reviewed Mossack Fonseca files relating to Kapur and his older brother Kabir. The judge issued an order April 21, encouraging the investors and the SEC to keep pursuing Kapur’s money, including “leads suggested by the Panama Papers.”
The “most voluminous bunch of documents” related to the Kapurs and an entity Chetan Kapur started with the help of lawyers at Mossack Fonesca -- the Family and Children Charitable Foundation, the newspaper said.
Just months after Kapur was charged with securities fraud in the U.S., he had an e-mail exchange with Mossack Fonseca employees in November 2012, asking that ownership of the foundation be transferred to his brother Kabir, the newspaper reported. Kabir then wrote Mossack Fonseca, seeking a letter attesting that Chetan had no access to the foundation, saying it was “KEY to making sure he does not get detained.”
An e-mail to Kabir Kapur’s relative in India wasn’t immediately returned.
Kapur’s lawyer, Eric Creizman, and Kevin Callahan, a spokesman for the SEC, declined to comment on the case. Mossack Fonseca didn’t respond to an e-mailed request for comment.
Kapur, 41, an Indian-born fund manager with a bachelor’s degree from the University of Pennsylvania’s Wharton School of Business, pleaded guilty to failing to maintain proper documents of two funds he managed at ThinkStrategy. He was sentenced to time served and a year’s probation. He also was found liable for fraud in the investor lawsuit and agreed to settle the SEC claims.
Kapur was ordered to pay the investors $4.8 million and agreed to give regulators $4.9 million. Three years elapsed and Kapur hadn’t paid a cent, so Engelmayer jailed him.
Kapur claims he owes more than $20,500 on his credit cards. His lawyers say their search for assets was stymied because Kapur said he couldn’t remember the password to his Gmail account. Kapur said he gave a $92,000 engagement ring, returned to him by an ex-fiancee, to his mother. She said she sold it and bought $1,500 in costume jewelry, according to Kapur’s lawyers. The SEC, meanwhile, noted that Kapur gave a Porsche 911 that he bought for $120,000 to a friend who doesn’t drive.
Kapur lost credibility with the judge after he got caught lying when he failed show up for a civil trial. He claimed through his lawyer that he was “deathly ill with enteric fever in India” -- a contagious form of typhoid -- and submitted fake doctor notes to the judge. He later admitted he was actually in New York, in fine health.
Engelmayer hasn’t bought Kapur’s poverty claims, saying evidence shows he had access to several million dollars held in two Swiss bank accounts established with the help of Mossack Fonseca. His tax returns showed he’d collected almost $5.4 million while at ThinkStrategy, yet verified only $2 million in legitimate business expenses, the judge said.
Kapur also transferred $2.1 million to an account he had at Bank J. Safra Sarasin from a ThinkStrategy account and moved as much as $7 million to Vontobel Holding AG, under the name of the Family and Children Charitable Foundation, a move arranged by Mossack Fonseca, Engelmayer said.
“The onus is on him to make the showing of inability to access the money,” Engelmayer said at an April 12 hearing. “It’s been approximately nine months -- Mr. Kapur has utterly failed to purge the contempt, either by paying judgments or proving impossibility to do so.”