Top Republican fundraiser’s insider trading trial called off amid possible deal

Dr. Zachariah P. Zachariah

Dr. Zachariah P. Zachariah

By Dan Christensen,

Next week’s federal insider trading trial of a major Broward GOP fundraiser with close ties to former President George W. Bush has been called off while a possible settlement deal is worked out.

Dr. Zachariah P. Zachariah, his physician brother and a third Fort Lauderdale doctor are accused of hauling down more than a half-million dollars in illegal profits during a fraudulent stock trading scheme in 2005.

A trial on the civil charges that was set for Nov. 9 was cancelled to allow time for the Securities and Exchange Commission to decide whether to accept signed offers of settlement from co-defendants Dr. Mammen P. Zachariah and Dr. Sheldon Nassberg, according to court records. 

The SEC informed the court it also has reached a “memorandum of understanding” with Zach Zachariah, but said it was “unclear” whether the charges against him could be resolved without a trial. None of the agreements are public.

U.S. Magistrate Linnea R. Johnson ordered both sides to report back to the court by December 15.

SEC trial attorney Christopher E. Martin declined comment.

Zachariah has denied the government’s accusations in court filings. His Miami defense lawyer, Curtis Miner, declined to comment for this article.

All three physicians practice at Fort Lauderdale’s Holy Cross Hospital. The Zachariah brothers are cardiologists; Nassberg is an endocrinologist.

But it is Zachariah Zachariah, the hospital’s chief of cardiology who emigrated to the U.S. from India in 1972, who is the principal focus of public interest because of his extensive connections to the Bush family and the Republican Party.

Zachariah was a Bush ‘Ranger’ 

Over two decades, Zachariah has raised millions of dollars for Republicans in federal and state races. In 2000 and 2004, he was among President Bush’s elite Pioneer and Ranger fundraisers. [Mammen Zachariah was a 2004 Bush-Cheney Pioneer.] In 1992, he co-chaired the first President Bush’s Florida fundraising effort.

Zachariah serves on the state university system’s Florida Board of Governors, and is a past member of the Florida Board of Medicine. Gov. Jeb Bush appointed him to both posts. Zachariah is also a member of two of the former governor’s private, nonprofit charities – the Foundation for Florida’s Future and the Foundation for Excellence in Education.

The SEC’s May 2008 complaint describes illegal trading by Zachariah in 2005 in the shares of two unrelated companies, Miami generic drug maker IVAX and Sarasota’s Correctional Services Corp (CSC).

Zachariah was on IVAX’s board that July when company chairman Phil Frost informed him that IVAX had agreed to be acquired by Teva Pharmaceuticals Ltd. for $26 a share. Within minutes, the SEC said, Zachariah called his broker and bought 35,000 IVAX shares at less than $21 a share.

The SEC said Zachariah also tipped his brother, who bought 2,000 IVAX shares for about $23 a share on the last trading day before the deal was announced on July 25.

Zachariah’s purchases were made during a regulatory “blackout” period when IVAX insiders were forbidden from trading in company stock, the SEC said. Zachariah was also accused of  violating insider trading rules when, in May, he failed to have IVAX pre-clear his purchase of 30,000 shares for less than $19 a share.

Illegal trades at GEO

Zachariah allegedly used inside information to make even more money trading shares of CSC, which was acquired by The GEO Group of Boca Raton.

The government says Zachariah got that non-public information from his son, GEO employee Zachariah “Reggie” Zachariah, and through his moonlighting work as a GEO consultant.

GEO, once known as Wackenhut Corrections Corp., announced the acquisition on July 14, 2005.

From March 16 and July 7, Zachariah bought 83,000 CSC shares for $220,000. The SEC says he also tipped his brother and Nassberg. Mammen Zachariah paid $263,000 for 51,000 shares, and Nassberg spent $31,800 on 10,000 shares in the week before the announcement, the SEC said.

Each man sold his CSC shares the day of the announcement. Zachariah collected $470,000, more than doubling his money. His brother and Nassberg saw gains of 80 percent apiece in a matter of days, the SEC said.

Zachariah’s lawyers, including former Republican Miami U.S. Attorney Roberto Martinez, previously asked the court to dismiss the GEO insider trading case, arguing they were “mere conjecture without support of evidence.”

But Magistrate Johnson declined, saying “ample evidence” exists to go to trial on those charges.

The SEC has asked the court to order the defendants to disgorge their “ill-gotten gains,” and pay additional fines. The SEC also seeks an order that would bar Zachariah from serving as an officer or director of a public company.

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