Man Claims Check Kiter Cost Him $100M

WHITE PLAINS, N.Y. (CN) - A man who claims he once was the world's largest computer hard drive distributor claims his company's new majority shareholder defrauded the company in a $100 million check-kiting scheme. Vikas Goel claims he sold 51 percent of his shares in eSys Technologies to Teledata Informatics for $105 million in equity and a $15 million loan, but Anush Ramachandran, a company officer, misappropriated the money.

Goel claims Teledata was a sham company that used phony sales and revenue figures to appear like a software company with access to $100 million in cash. Goel and Rainforest Trading sued Ramachandran and Bunge Ltd. in Westchester County Court.

Goel, of Dubai, claims he founded Singapore-based eSys in 2000, and by 2006 his computer equipment distribution startup had grown into a multinational company with $2 billion in annual revenue and 100 branches in more than 30 countries.

He claims eSys became the world's largest computer hard drive distributor and one of the top 10 computer distributors, selling products from major computer equipment manufacturers, including Seagate Technologies, Intel and IBM.

"In 2006, Seagate and eSys had a dispute and those distribution agreements were terminated," according to the complaint. "Due to the adverse publicity, eSys needed to raise approximately $100 million quickly, in order to pay creditors and stay in business."

Credit Suisse valued eSys at $500 million and offered to provide investments and conduct an IPO, but Goel decided to sell 51 percent of eSys shares to Teledata, he claims.

Goel claims he realized too late that Teledata was a "sham company" that got financing for the transaction by inflating its profits through a series of fictitious sales to Bunge and other shell companies that Ramachandran controlled.

"At no point during the transaction did Ramachandran disclose the scheme or Teledata's intentions to falsely inflate profits through a kiting of funds as described herein, and by reporting false and inflated financial results on Teledata's financial statements," according to the complaint.

Goel claims Teledata was supposed to invest $25 million of its own money to get an $80 million loan from the State Bank of India, but Teledata never intended to make that investment.

Instead, Teledata transferred much smaller sums to Rainforest Trading, a British Virgin Islands company that Goel created as a holding company for eSys shares and to facilitate payments from Teledata to buy those shares, according to the complaint.

Teledata then transferred the funds from Rainbow to Bunge and other companies that were controlled by Ramachandran, according to the complaint. Goel says Bunge received the funds and transferred them back to Teledata, which "reinvested" them in Rainforest.

By investing the money in the circular pattern, it appeared Teledata had invested much more than it actually had, according to the complaint.

Goel claims Teledata submitted the superficial records to the State Bank of India. Thinking that Teledata had invested $25 million in Rainforest, the bank gave Teledata access to the $80 million line of credit, according to the complaint.

"Armed with that financing, Teledata should have invested the $105 million (subsequently increased to $120 million) it had committed to invest into Rainforest/eSys," but it transferred only a small fraction of the money and rerouted the money back to Teledata, according to the complaint. (Parentheses in complaint.)

Teledata also falsely inflated its revenue by reporting the money it received from Bunge as revenue, though it was the same money it reported that it was investing in Rainforest as equity, Goel claims.

"Teledata is not a party to this case, because, amongst other things, Goel's contract with Teledata contains an arbitration clause calling for arbitration in Singapore," according to the complaint. "Further, various banks and companies have filed winding-up proceedings against Teledata in India. It is believed Teledata is without assets."

Goel and Rainbow sued Ramachandran, Bunge and Bunge SA, the company's Switzerland-based subsidiary, alleging fraud and tortious interference with contract. The plaintiffs are represented by Robert Sentner with Nixon Peabody of Manhattan.

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