Zachariah’s insider trading case now in judge’s hands

Melanie May

Melanie May

Robert Butterworth
Robert Butterworth

By Dan Christensen,

The federal insider trading trial of top Republican fundraiser Dr. Zachariah P. Zachariah wrapped up Friday without hearing testimony from two big-name defense character witnesses. A judge’s verdict is expected in a few weeks.

Zachariah, the director of the Fort Lauderdale Heart Institute at Holy Cross Hospital, is accused by the U.S. Securities and Exchange Commission of using nonpublic information to make nearly $1 million in illegal profits in 2005 trading the stock of two Florida companies.

On the witness stand last month, Zachariah denied the SEC’s accusation that he used inside connections to make a killing in the stock of two Florida corporations whose shares rose during takeovers. But Zachariah also testified to placing “hundreds and hundreds” of trades a year – many between office visits with patients – and losing $25 million.

Zachariah faces no prison time because the charges are civil, not criminal, but his reputation – and wallet – are on the line. If the judge finds Zachariah committed civil fraud, she could impose a stiff fine, order him to repay any ill-gotten gains with interest and bar him from serving as an officer or director of a publicly traded company.

The bench trial began Aug. 24. It ran longer than expected, and in early September scheduling problems forced proceedings to be suspended until last week.

Zachariah, a native of India, is a staunch Republican who has raised millions of dollars for the party over two decades. He is close to the Bush family, and was an elite fundraiser for both Presidents Bush and former Gov. Jeb Bush.

President George W. Bush nearly nominated him to become U.S. Surgeon General in 2006, but the SEC’s investigation interfered with the White House’s plans.

During the trial, Zachariah joked that he hasn’t been invited to the White House lately.

Zachariah P. Zachariah

Zachariah P. Zachariah

The government relied heavily on written records to document Zachariah’s trades, phone calls and inside corporate connections. The defense hoped to offset that, in part, by presenting character testimony from Fourth District Court of Appeals Judge Melanie May and former Democratic Florida Attorney General Robert Butterworth.

Character testimony is generally barred in such cases, but Zachariah’s attorneys – former federal judge and U.S. Attorney Tom Scott and ex-federal prosecutor Curtis Miner – argued it should be allowed because SEC trial attorney Christopher Martin had attacked Zachariah’s “character for truthfulness.”

U.S. Magistrate Linnea R. Johnson, the presiding judge, disagreed. She excluded their testimony saying Martin’s questions were about the issues to be decided, not about impugning Zachariah’s character.

“It is simply not an attack on a witness’s character to suggest that he is presently being untruthful…or that he was being untruthful while being investigated in the past,” Johnson said in a ruling issued early last week.

Still, a summary of what Broward residents May and Butterworth had to say about Zachariah in depositions last spring was made public in defense filings.

“I think he’s someone that when he tells you he’s going to do something, he does it. A lot of people talk a lot and don’t act,” said May, who testified that she has known Zachariah since 1992 due to his fundraising efforts on behalf of the Pace Center for Girls, a nonprofit group that provides alternative educational programs for at-risk girls.

Butterworth, a former Broward sheriff and judge who served as Florida’s attorney general from 1986 to 2002, said he considers Zachariah’s character for truthfulness to be “the highest.”

“It’s just the way he’s conducted himself…I’ve seen him with his patients. I’ve seen him in the outside arena with his generosity and never asking for anything in return,” said Butterworth, who testified he’s known Zachariah for 30 years.

Zachariah, who has a private jet, a yacht and a lavish home on the Intracoastal Waterway in exclusive Sea Ranch Lakes, was charged in 2008 along with two other Holy Cross physicians, his brother, Dr. Mammen Zachariah, and Dr. Sheldon Nassberg. His brother and Nassberg paid large sums months ago to settle their cases.

The SEC contends 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, a Boca Raton-based prison contractor.

Zachariah was on IVAX’s board of directors in July 2005 when he purchased 35,000 IVAX shares for less than $21 a share. He acted minutes after Chairman Phil Frost phoned to tell him IVAX had agreed to be acquired by Teva for $26 a share, according to the SEC. Zachariah denied taking the call.

At the time, IVAX’s directors were forbidden by law from trading the company’s stock.

Zachariah had no connections to CSC when he paid $220,000 for 83,000 shares between March and July 2005. But he did have inside connections at GEO, which was about to acquire CSC. His son, Reggie, worked in GEO’s merger department on the CSC deal. Zachariah himself was a company consultant paid handsomely to introduce company officials to GOP leaders in Washington and Tallahassee.

“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 testified.

The day the CSC acquisition was announced, Zachariah sold his shares at a large profit. He testified that no one – not even his son – had tipped him to the deal.

Both Reggie and GEO chairman and CEO George Zoley also testified at trial.

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Latest comments

  • In her holding ( ) which precluded Dr. Zachariah from presenting character evidence, Judge Johnson admitted that the SEC had attacked Zachariah’s truthfulness “on virtually every aspect of his substantive testimony” during its cross examination. Is not truthfullness overwhelmingly important and relevant to ’substantive’ testimony?

    The Judge then wrote that: “It is simply not an attack on a witness’s character to suggest that he is presently being untruthful … or that he was being untruthful while being investigated in the past”. Since when, and in who’s world, is it not an attack on a man’s character to suggest that he is “untruthful”!?

    It is an unAmerican travesty to muzzle a man’s defence and not allow a fair hearing of all his evidence. Thank you for presenting a balanced report with some of the pertinent character evidence of Robert Butterworth & Melanie May. Dr Zachariah is innocent – he had no “intent” to do anything wrong – it is not in his character. In 1993, the Governor and Cabinet of Florida recognized Dr. Zachariah as having “given of himself and his time to enhance and improve the quality of life for mankind through his untiring efforts on behalf of medicine, health, government and education”; adding that “since the beginning of his career, he has focused his time and attention on improving the lives of his fellow human beings”.

    Dr. Zachariah came to the U.S.A. in 1972 and obtained a U.S. medical license in 1976. Specializing in cardiology, he has saved innumerable lives. Having successfully achieved “the American dream”, he shared his good fortune with generous contributions to the American Heart Association, the worldwide City of Hope, the Museum of Science and Discovery, Nova University, the Broward PACE Center for girls, and numerous other charities, organizations, and civic endeavors. In 2000, he donated $2 million to help build the new Heart and Vascular Center at Holy Cross Hospital in Fort Lauderdale. He was also awarded the Ellis Island Medal of Honor for his philanthropic and leadership activities.

    The world is watching and judging how people who have come to America and given us their talents, time, and money are treated here. The SEC could better spend their time and the taxpayer’s money investigating and convicting the real crooks who are deliberately scamming people. If the Court fines him for making a mistake, I hope they will order him to contribute the money to a worthy charity – – he would have done that anyway.

  • he is a good man, never would i believe he would do anything intentionaly wrong, inadvertantly perhaps, intentionaly never.

  • I’m thinking that perhaps the Judge considered “Character evidence” unnecessary to be offered – because the evidence presented was already unconvincing and insufficient to support any guilt on Dr. Zachariah’s part.

  • Acquit , find not guilty, clear, set free, release, exonerate Amen!

  • HAHAHA It looks as if Dr. Zachariah forgot to sign his above comment. The game is: match the above comment to Zachariah.

    Trick question…’all of the above’?

  • Guilty. The evidence clearly indicates insider trading, they even had his phone records to show when he received info from his son and Zoley and when he traded. The fact that his son was working on the acquisition and him trading in that stock is a big red light. But then again, he is connected, so nothing will probably happen.

  • Please do not rush to judgment. How can a phone call to one’s own family member or business associate automatically constitute guilt? Opinions cannot replace facts. Thank goodness that we live in America where a person is presumed innocent until proved otherwise.

  • Liar,liar…pants on fire!

  • My whole family bought shares in a comapny when one of our relatives was hired as Big Time

  • company executive and we all lost a ton of money. We only invested because they wanted to show support not because we had any specific information. The sec only finds fault and connections on sucessful trades?
    Maybe they are Bullying Dr. Zach.

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