The former founder and CEO of a Bergen County pharmaceutical firm embezzled $3.9 million from the business to help pay credit card charges, property taxes and his kid's private school tuition, an indictment returned by a federal grand jury on Friday says.
John Klein, 76, was arrested by federal agents last December.
By that point, he'd been sued in federal court by several people with whom he either worked or collected investment money from at Cambridge Therapeutic Technologies in Teaneck, records show.
Klein -- now of Tampa, Florida -- "looted and pilfered" the company to fund a "lavish" and "luxurious" lifestyle that included a summer rental on Long Island's East End and season tickets to Chicago Bears games, federal authorities charged.
He used investor money, for instance, to pay taxes on what was then his "palatial" $20 million estate in Alpine, they said.
Klein, who later moved to Palisades Park, also withdrew cash in amounts of just under $10,000 -- the federal reporting requirement -- and "made improper and unexplained payments in excess of $1.1 million to his brother, friends and other associates who have no connection" to the business, according to those who complained.
Klein hired a CFO who "created a profit and loss statement showing the pharmaceutical company’s sales and corresponding receivables," a federal complaint on file in U.S. District Court in Newark says.
"According to that individual, Klein provided information that included an account receivable of approximately $3.9 million from a customer that had not been collected," the complaint says.
"In December 2016 and January 2017, the pharmaceutical company, with Klein’s knowledge and approval, put a reserve against the uncollected receivable in the financial statements," it says.
Federal investigators found that Klein "controlled and used a pre-existing pharmaceutical company bank account" and that "a review of that account revealed that the approximately $3.9 million was transferred into the bank account in May 2016.
"In a June 2016 email, Klein acknowledged that the invoices related to the approximately $3.9 million had been paid in full," the complaint says.
"A review of the company bank account also showed that following the wire transfers of approximately $3.9 million, Klein made numerous personal expenditures out of the account, including credit card payments for his himself and his wife, payment of property taxes, and tuition payments for his child’s private school," it adds.
U.S. Attorney Philip R. Sellinger credited special agents of the FBI and IRS – Criminal Investigation with the investigation leading to Klein's arrest and subsequent indictment, secured by Assistant U.S. Attorneys Anthony Tornatore and Andrew Kogan of his Cybercrime Unit in Newark.
Klein remains free pending trial on wire fraud charges.
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