SEC Announces Resolution of Civil and Criminal Actions Against Former CFO of Information Technology Company
The Securities and Exchange Commission announced on November 15, 2018, the resolution of three actions against the CFO of a Chicago-area information technology company, who was previously charged by the SEC and the U.S. Attorney’s Office. Dhru Desai was ordered, in the SEC’s civil action, to pay approximately $1.63 million in disgorgement, prejudgment interest, and a civil penalty; suspended by the Commission from practicing before the Commission on the basis of his guilty plea in the parallel criminal action; and sentenced to 39 months in prison in the criminal action.
The SEC’s complaint, filed on June 29, 2017 in the U.S. District Court for the Northern District of Illinois, alleged that former chief executive officer Nandu Thondavadi and former chief financial officer Dhru Desai stole more than $4 million from Schaumburg, Illinois-based Quadrant 4 System Corp., for a nearly five-year period. The former executives also allegedly caused Quadrant 4 System 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 Nandu Thondavadi and Dhru Desai were arrested and criminally charged with fraud. Quadrant 4 System announced their resignations in December 2016 and disclosed that the company’s financial reports could no longer be relied upon and required a restatement.
On November 30, 2016, Nadu Thondavadi and Dhru Desai were charged with wire fraud and certifying false financial reports. On June 29, 2017, the U.S. Attorney’s Office expanded the charges against Nadu Thondavadi and Dhru Desai to include many of the allegations in the SEC’s complaint. On May 31, 2018, Dhru Desai pleaded guilty to wire fraud in this parallel criminal action.
On June 25, 2018, the Court in the SEC’s action entered a Final Judgment against Dhru Desai, which imposed a permanent injunction, disgorgement of ill-gotten gains totaling $1,293,694, prejudgment interest thereon of $150,117, and a $184,767 civil penalty.
On September 26, 2018, the Commission issued an order against Dhru Desai on the basis of his criminal conviction, suspending him from practicing before the Commission as an accountant.
On September 28, 2018, in the criminal action, the Court sentenced Dhru Desai to 39 months in prison and $2,869,226 in restitution (jointly and severally with Nandu Thondavadi).
This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates Law Group, P.A provides ongoing corporate and securities counsel to private companies and public companies listed and publicly traded on the Frankfurt Stock Exchange, London Stock Exchange, NASDAQ Stock Market, the NYSE MKT and OTC Markets. For two decades the Firm has served private and public companies and other market participants in SEC reporting requirements, corporate law matters, securities law and going public matters. The firm’s practice areas include, but are not limited to, forensic law and investigations, SEC investigations and SEC defense, corporate law matters, compliance with the Securities Act of 1933 securities offer and sale and registration statement requirements, including Regulation A/ Regulation A+ , private placement offerings under Regulation D including Rule 504 and Rule 506 and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, Form F-1, Form S-8 and Form S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including Form 8-A and Form 10 registration statements, reporting on Forms 10-Q, Form 10-K and Form 8-K, Form 6-K and SEC Schedule 14C Information and SEC Schedule 14A Proxy Statements; Regulation A / Regulation A+ offerings; all forms of going public transactions; mergers and acquisitions; applications to and compliance with the corporate governance requirements of national securities exchanges including NASDAQ and NYSE MKT and foreign listings; crowdfunding; corporate; and general contract and business transactions. The firm provides preparation of corporate documents and other transaction documents such as share purchase and exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The firm prepares the necessary documentation and assists in completing the requirements of federal and state securities laws such as FINRA and DTC for Rule 15c2-11 / Form 211 trading applications, corporate name changes, reverse and forward splits, changes of domicile and other transactions. The firm represents clients in London, Dubai, India, Germany, India, France, Israel, Canada and throughout the U.S.