Republican fundraiser Zachariah testifies in own defense in insider stock trading trial

By Dan Christensen, BrowardBulldog.org

Impeccably dressed and unfailingly polite, Fort Lauderdale cardiologist and master Republican fundraiser Dr. Zachariah P. Zachariah testified at his insider trading trial last week about what it’s like to make and lose a fortune on Wall Street.

“I made millions of dollars in the market, and I lost millions of dollars in the market,” Zachariah told a Securities and Exchange Commission attorney. “One time I took a portfolio from $40 million up to $60 million in two months. You’d think I was a mini-Warren Buffet. Now, you think I’m a fool.”

The SEC has accused Zachariah of using nonpublic information to make nearly $1 million in illegal profits in 2005 trading the stock of two Florida companies.

If U.S. Magistrate Judge Linnea R. Johnson decides that Zachariah committed civil fraud she could impose a large fine, order him to pay back the money he made with interest, and ban him from serving as an officer or director of a publicly traded company.

On the witness stand in federal court in West Palm Beach on Thursday and Friday, Zachariah denied any wrongdoing. But his self-description portrayed a physician seemingly obsessed with playing the stock market.

Zachariah likened his investing strategy to “gambling.” He testified about placing “hundreds and hundreds” of trades a year – many sandwiched between visits with patients at his third floor office suite at Holy Cross Hospital. Records of his online account at Charles Schwab showed he logged in frequently, sometimes a dozen times a day.

In sum, Zachariah said, he lost about $25 million trading stocks over the years.

Still, he remains a multi-millionaire with a private jet and yacht, and a lavish home on the Intracoastal Waterway in exclusive Sea Ranch Lakes.

In the political world, Zachariah is a Republican stalwart who has raised millions of dollars for his party over two decades. He is close to the Bush family, and an elite fundraiser for both Presidents Bush and former Gov. Jeb Bush.

Raising money for politicians has paid personal dividends for Zachariah.

President George W. Bush nearly nominated him to become U.S. Surgeon General in 2006, until the SEC’s investigation halted the White House’s plans. And Zachariah moonlighted as a corporate consultant whose stock-in-trade was the sale of political access to GOP leaders on Capitol Hill, Tallahassee and elsewhere.

“They knew I’m friends with several governors, Senators, Speakers of the House, Presidents of the Senate…and wanted access to those men and women in authority,” Zachariah said.

At the end of his testimony, the judge suspended the trial until Oct. 5 because of scheduling conflicts.

Zachariah, director of the Fort Lauderdale Heart Institute, was charged in 2008 along with two other Holy Cross physicians, his brother, Dr. Mammen Zachariah, and Dr. Sheldon Nassberg. His defense lawyer, Curtis Miner, asked him to explain to the court why he chose to fight when they paid substantial sums to settle their cases.

“I know I’m right. Thank God I had the resources to fight it,” Zachariah said.

The SEC alleges Zachariah wrongfully bought and sold shares of Miami-based generic drug maker IVAX and Sarasota’s Correctional Services Corp. (CSC).

IVAX was later taken over by Teva Pharmaceuticals. CSC was bought out by The GEO Group, the Boca Raton-based prison contractor once known as Wackenhut Corrections.

Zachariah was a member of IVAX’s board of directors when he purchased 35,000 IVAX shares on July 6, 2005 for less than $21 a share. According to the SEC, he acted minutes after Chairman Phil Frost phoned to tell him IVAX had agreed to be acquired by Teva for $26 a share – a deal code-named “Project Goldmine” by Frost.

Project Goldmine

IVAX insiders were subject to a regulatory “blackout” period at the time, and were forbidden by law from trading the company’s stock.

On the witness stand, Zachariah denied talking to Frost that day and disputed phone records suggesting he did.

Zachariah also testified he didn’t know he was ineligible to trade stock that day. He said IVAX sent a copy of its insider trading policy to his office when he joined the board in April, but that he never saw it.

“I wish to God that I received the document. I wouldn’t be here today,” Zachariah said.

Zachariah was not on CSC’s board when he bought 83,000 CSC shares for $220,000 between March and July 2005. But according to SEC trial attorney Christopher Martin, Zachariah had other ways to learn of GEO’s confidential takeover plans.

He worked as a consultant to GEO, introducing Chairman and CEO George Zoley – who was also his friend and neighbor – to various politicians. And his son, Reggie Zachariah, was a GEO employee whose duties included working on the CSC acquisition.

Zachariah sold his CSC shares at a large profit the day the acquisition was announced. On the witness stand last week, he testified that no one – not even his son – had tipped him to the deal.

Zachariah also denied SEC allegations that he withheld potentially damaging information about the nature and extent of his consulting work for GEO during earlier questioning by SEC investigators in 2006.

“You were up for Surgeon General of the United States. If the investigation goes away, good chance you get that job,” said Martin.

“I was not going to hide anything from you. I had given all the agreements to the SEC,” said Zachariah.

Frost, now the billionaire chairman of Teva Pharmaceuticals, and GEO Group boss Zoley are expected to testify when trial resumes next month.

Between now and then, the judge must decide whether to allow character testimony about Zachariah by former Florida Attorney General Robert Butterworth and Fourth District Court of Appeals Judge Melanie May.

Both gave depositions in May that have not been made public.