Republican fundraiser’s insider trading trial opens, big names expected to testify

Zachariah Zachariah

By Dan Christensen, BrowardBulldog.org

Testimony began Tuesday in the politically-charged, insider stock trading trial of Fort Lauderdale heart doctor and top Republican fundraiser Dr. Zachariah P. Zachariah.

Zachariah, who has raised millions of dollars for the GOP, stands accused by the Securities and Exchange Commission of using nonpublic information to make nearly $1 million in illegal profits trading stock in two Florida companies in 2005.

The federal civil trial in West Palm Beach is expected to last about a week.

Some big names are expected to testify, either in person or by deposition. They include South Florida corporate titans Philip Frost, the billionaire chairman of the board of Teva Pharmaceuticals, and George Zoley, CEO and chairman of The GEO Group of Boca Raton.

Fourth District Court of Appeals Judge Melanie May and former Florida Attorney General Bob Butterworth could also appear. Each gave character witness depositions for Zachariah in May that have not been made public. The government is asking the court to exclude their testimony, but there’s been no ruling.

If the judge finds Zachariah committed fraud she could order him to pay back the money he made with interest, impose a large civil penalty and bar him from serving as an officer or director of a publicly traded company.

Both sides outlined their case Tuesday in opening arguments before U.S. Magistrate Linnea R. Johnson – who will decide the case.

SEC trial attorney Christopher Martin portrayed Zachariah as a consummate political and corporate insider with no qualms trading on valuable inside information he learned as a corporate board member and through other means.

“It’s really hard to imagine anyone less fit to serve” on a company’s board, said Martin, who characterized Zachariah as a “prominent South Florida political fundraiser and powerbroker.”

‘A model citizen’

In contrast, defense counsel Curtis Miner called Zachariah “a model public citizen” who has served selflessly on public boards – he’s a former chairman of the Florida Board of Medicine and current trustee for Nova Southeastern University – while giving generously to charity.

“He has the trappings of wealth, a nice house, a boat. Does that make him a greedy person? No. It just means he’s successful,” said Miner, co-defense counsel along with former federal judge and U.S. Attorney Tom Scott.

Zachariah, an elite Pioneer fundraiser for President George W. Bush and co-chair of Florida fundraising for the first President Bush in 1992, is the director of the Fort Lauderdale Heart Institute at Holy Cross Hospital. He has testified previously that Bush wanted to name him U.S. Surgeon General in 2006, but that the plan was torpedoed by the SEC’s investigation.

Zachariah, his brother Dr. Mammen Zachariah, and their friend, Dr. Sheldon Nassberg, are named in the SEC’s May 2008 insider trading complaint. His brother and Nassberg, who also practice at Holy Cross, paid substantial sums in December to settle the insider trading charges against them.

Nassberg was the first to take the witness stand Tuesday as an adverse witness for the government. Under contentious questioning, Nassberg said that before he settled, Zachariah had offered to loan him money to pay his legal fees. “But it never came to be,” said Nassberg, who returns to the witness stand this morning.

Zach Zachariah, who listened intently in court on Tuesday, is accused of using inside information to buy and sell shares of Miami-based generic drug maker IVAX and Sarasota’s Correctional Services Corp. (CSC).

Ivax was later bought out by Teva. CSC was taken over by GEO.

According to the SEC, Zachariah was on IVAX’s board of directors in July 2005 when Frost, then chairman of IVAX, informed him Ivax had agreed to be acquired by Teva for $26 a share. Within minutes, before the deal was made public, Zachariah bought 35,000 IVAX shares for about $21 a share, the SEC says.

Tipped his brother?

Zachariah is also alleged to have tipped his brother, who bought 2,000 shares that he later sold for a profit.

All three doctors are accused of loading up on CSC shares in the weeks before a July 14, 2005 takeover announcement by GEO. The SEC says they did so because Zachariah got a sneak peak at inside information about GEO’s plans.

The SEC contends Zachariah had plenty of ways to find out. Among other things, he worked as a consultant for GEO, introducing Zoley to politicians in Washington and Tallahassee. And his son, Reggie, was a GEO employee whose duties included working on the CSC acquisition.

Zachariah’s defense conceded those avenues of access, and others, but said they prove nothing because he received no inside information – not even from his son. He said Reggie Zachariah will testify to that.

“The government’s case is circumstantial,” Miner said.

To win, the SEC must prove its case by the legal standard known as a “preponderance of the evidence.” That’s less than “beyond a reasonable doubt,” the standard required for a criminal conviction.