The former chief executive officer and owner of a pharmaceutical company was arrested this morning for embezzling millions of dollars from the company,.
John Klein, 75, of Palisades Park, New Jersey, is charged by complaint with one count of wire fraud. Klein is scheduled to appear by videoconference today before U.S. Magistrate Judge Michael A. Hammer.
According to U.S. Attorney Rachael A. Honig, Klein was the majority shareholder and CEO of a pharmaceutical company.
In July 2016, Klein hired as chief financial officer an individual who created a profit and loss statement showing the pharmaceutical company’s sales and corresponding receivables.
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.
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.
In a June 2016 email, Klein acknowledged that the invoices related to the approximately $3.9 million had been paid in full.
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.
The charge of wire fraud is punishable by a maximum potential penalty of 20 years in prison and a fine of $250,000 or twice the gross profits or twice the gross loss suffered by the victims of his offense, whichever is greatest.
Klein served as the chairman and CEO at Cambridge Therapeutics, chairman and director of NovaDel Pharma, Inc., and as the chairman and CEO of Dava Pharmaceutical Company.