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Latest twists and turns in Inyx saga

By Kirsty Barnes

- Last updated on GMT

Related tags: Bankruptcy

The latest twists and turns in the Inyx Inc. bankruptcy saga
include an attempted power seize by its creditor, fraud allegations
thrown around courtrooms and in the media, the resignation of Inyx'
accountants, and increasing signs of links between Inyx and
a company called Karver.

Matters came to a head in a US bankruptcy court last Friday when Westernbank, in a surprise move, revealed that it plans to seize control of Inyx USA, an Inyx Inc. subsidiary based in Puerto Rico. On 2 July Inyx placed its non-UK subsidiaries, Inyx USA and Exaeris into voluntary Chapter 11 bankruptcy protection. The beleagured pharma services firm and the Puerto Rican bank are involved in a bitter legal battle over financing arrangements that have turned sour. At the end of June the entire UK operations of Inyx Inc. were put into administration by the bank, after Inyx allegedly defaulted on loans to the tune of around $130m (€95m). Inyx Inc. then launched a lawsuit against the bank alleging, among other things, that Westernbank "acted in bad faith and in a commercially unreasonable manner."​ Westernbank bit back launching its own legal bid with allegations of "racketeering and corruption".​ Three weeks ago, despite the objections of Westernbank, Inyx Inc.'s chairman and CEO Dr Jack Kachkar was accepted as the debtor-in-possession lender for Inyx USA and Exaeris by a US bankruptcy court. As a condition, Dr Kachkar agreed to provide financing for Inyx' two North American subsidiaries, which would continue to trade as normal, albeit while still under Chapter 11. Westernbank's attempted power seize ​ Fast forward to the present. In court on Friday Westernbank revealed it would exercise "its rights as a secured creditor"​ and execute "a transfer of the stock"​ in order to take command of Inyx USA, said the bank's lawyer Harvey Miller of Weil, Gotshal & Manges, who insisted the move was in line with US bankruptcy laws, it was reported by Dow Jones Newswire. ​ According the newswire, Westernbank's plans to seize control over Inyx USA came as a shock to Inyx Inc. Robert Carrigan, vice president of Inyx USA, reportedly said that the first he had heard of the takeover was in the courtroom announcement on Friday. A spokesperson from Inyx Inc., who did not wish to be named, confirmed with Outsourcing-Pharma.com that Westernbank is now attempting through the courts to execute the stock transfer of Inyx USA because "it was a condition of the loan agreements that they could do so".​ However, the spokesperson said that Inyx is fighting the move because the company is currently under Chapter 11, which means it is protected by US law from such a share takeover, despite the conditions of the loan. Exaeris, is not being pursued by Westernbank, and Inyx Canada is now virtually defunct, the spokesperson confirmed. Westernbank is particularly interested in seeing that the Puerto Rican site remains operational, "because to close it would reduce its high pharmaceutical value",​ it was reported previously by Puerto Rican news outlet El Vocero​, citing an interview with the president and main executive official of Westernbank, Frank Stipes. Meanwhile, the two companies spent their day in court on Friday to argue over other details of their dispute. "We took them to court with complaints on how they were conducting themselves,"​ said the spokesperson, who alleged that Westernbank were "overstepping themselves"​ on a number of bankruptcy procedures. As reported by Dow Jones​, Carrigan made allegations that Westernbank auditors and accountants seized computers and sealed offices with tape last week, a move that Inyx USA lawyers claimed exceeded Westernbank's authority, which only entitled it to have access to books and records. Carrigan also alleged that an auditor from Westernbank held up a shipment of 16 pallets of drug products in order to inspect them for any documents that Inyx was trying to hide. Incidentally, Carrigan is the same man who faced a lawsuit in Ireland along with Dr Kachkar back in 2003, over their involvement in the collapse of a company they had been running called Miza Ireland. Its UK, US and Canadian counterpart businesses had also gone bankrupt. Such scenes are reminiscent of the current state of affairs with Inyx Inc. At the time the judge ruled in favour of restricting Dr Kachkar and Mr Carrigan in Ireland under the Companies Act. The court order has been stayed pending an appeal to the Supreme Court. This is still the current status. Meanwhile, in contrast to Carrigan's Friday court allegations, Stipes alleged in the earlier interview with El Vocero​ that while on 11 July the bankruptcy court ordered that Inyx grant Westernbank access to all its business books and printed and electronic records, Carrigan had ordered that the group of auditors sent by the bank be denied entry to the building. Subsequently, the auditors returned along with three Federal police officers who remained in the building to prevent any document destruction, he said. A similar version of these events have also been reported by a number of members of internet weblogs who claim to have been present at the time. The two parties were back in court on Tuesday to continue the wrangling, and the judge has said he will make a decision on both the stock transfer and the trustee appointment tomorrow (Friday). Both firms allege they are victims of fraud ​ According to a Securities & Exchange Commission (SEC) filing posted on 11 July, when granting control to Dr Kachkar, the judge ordered that he make a payment of $750,000 by 13 July 2007 and another one of $1.35m by July 18; otherwise an independent trustee would be assigned to take control of the operations, without any appeal opportunity. The Inyx spokesperson confirmed that Dr Kachkar has indeed now made these payments to the court. However, they also confirmed that Westernbank made a court filing on 18 July and requested that an independent Chapter 11 trustee be appointed to take control of Inyx USA to replace Dr Kachkar. According to a Bloomberg​ report, the filing cited "specific events​ [concerning Inyx Inc.] evidence a pattern of fraud"​ and referred specifically to "false and fraudulent''​ invoices. On 19 July the bank then made a filing requesting that the US bankruptcy court transfer the case to the bankruptcy court in Puerto Rico. The case for these matters will also be decided by the US judge tomorrow, the spokesperson said. Stipes has been very vocal in the local Puerto Rican media on allegations of fraudulent activity perpetrated by Inyx' management. "Here there are clear and incontrovertible acts of fraud",​ he alleged in the interview with El Vocero. "The last visit to Inyx showed more than $40m in fraudulent invoices without verification and Inyx also diverted $14m to non-authorised accounts, from which Westernbank could not recover the debt,"​ Stipes alleged. Echoes of such activities are also appearing on internet weblogs, although of course, these are unsubstantiated. In addition, in an interview with Caribbean Business​, which has since been posted in an SEC filing, Stipes alleged that "Mr Kachkar was mistaken in his determination of whom he was dealing with. We will collect​ [the money owed]… be it dollar by dollar… he can run from us…but he can't hide." "…He won't ever be able to pull this scam on anyone in the Western Hemisphere again because, if he tries, they'll think of Westernbank",​ he further alleged. Commenting on such allegations and other financial details divulged by Stipes, the Inyx spokesperson said that Stipes has now landed himself in hot water for being too vocal and violating regulations by the disclosure of non-public information: "Westernbank is now under an SEC investigation,"​ they alleged. The spokesperson also referred to Inyx' own allegations of fraud having been perpetrated against themselves by Westernbank, described in lawsuit documents filed in July. "This action is based on the fraudulent conspiracy of Westernbank and its chairman of the board and CEO, Stipes, to increase its outstanding loan portfolio while overlooking and evading its [federal banking] lending and reserve requirements in order to: (i) earn immediate interest and fees; (ii) avoid negatively impacting the stock price of Westernbank's publicly-held parent; and (iii) make Westernbank a more attractive candidate for a proposed acquisition that was then under consideration that would have made Westernbank the largest bank based in Puerto Rico",​ the complaint alleges. "The principal pawn in this plan was Inyx, which Westerbank allowed to be put at heightened risk, and which Westernbank blamed and harmed when its scheme went awry,"​ it further alleges. The spokesperson also alleged that Inyx was not the only company to be affected by Westernbank's "fraudulent"​ tactics and referred to three other companies which are allegedly also experiencing similar problems with the bank - Mendoza, Syroco and Thom-Tex. Meanwhile in other related developments, it was announced in an SEC filing posted on 7 July, that Inyx Inc.'s certifying public accountants, Berkovits, Lago & Company, resigned from their position effective immediately. Inyx crew regrouping under Karver? ​ Outsourcing-Pharma.com previously reported that amidst all the insolvency and other financial problems with Inyx Inc., there is another shell pharma company to watch, called Karver International, which is currently being operated by the two head honchos in Inyx Inc., Dr Kachkar and Jay Green. Now it has been reported in a weblog by an undetermined blogger that the former Inyx Canada office in Toronto has now been renamed to Karver. "The door sign got renamed instantly from Inyx Canada to Karver",​ another unidentified blogger wrote. Reportedly Rima Goldshmidt, former vice president, treasurer and corporate secretary of Inyx Inc.; Randa Kachkar (Dr Kachkar's sister); and Marc Couturier, former Vice President of Finance at Inyx Inc; are all now employed at this location. It was also said that Steve Handley, who was president and director of Inyx Inc. and director of operations at Inyx Pharma (which he had helped set up); and Colin Hunter, executive vice president of Inyx Pharma (which he had also helped set up); may soon be joining their former colleagues at the Canadian location. The Inyx spokesperson denied this, stating that Inyx Canada used to lease office space off a company called Karver Capital Canada, although this is no longer the case because Inyx Canada is virtually defunct. Commenting on the employees, the spokesperson said that Goldshmidt (who resigned from Inyx Inc. following the initiation of the lawsuit) is now an "independent consultant"​ who does work for both Inyx and Karver in Canada, as is Randa Kachkar. Courtier works for Inyx Inc. although he lives in Canada so sometimes works from the office in Canada; Handley and Hunter (who resigned as directors of Inyx following the lawsuit) are both still employed by Inyx Inc. and it is not planned that they will work in Canada, said the spokesperson. In addition, the spokesperson also said that Karver Capital Canada is a privately owned company, with "no affiliation whatsoever"​ to Karver International, Inyx Inc. or Dr Kachkar. The spokesperson would not disclose the owner. However, a 2006 SEC filing reveals that there very much appears to be an "affiliation"​ indeed. Jay Green, Inyx Inc.'s vice president, treasurer, corporate secretary and a director; and Dr Kachkar's spouse, Viktoria Benkovitch, are co-owners of Karver Capital Holdings, a private investment holding company incorporated in the British Virgin Islands, of which Karver Capital Canada is a subsidiary. "Karver Capital Holdings is not a stockholder of Inyx but is a stockholder of Karver International… a publicly-held health services holding company",​ the filing states. "Dr Kachkar and Green are also stockholders, officers and directors of Karver International". ​ The filing continues: "…certain Inyx employees located at the company's [Inyx'] office in Toronto, Canada provide information technology and book-keeping services to Karver International". ​ Furthermore it was announced on 3 July that Karver Capital Holdings, in conjunction with Karver Capital Canada had completed the acquisition of the securities of International Wayside Gold Mines, a Canadian gold and mineral mine. The private placement was initiated by Dr Kachkar and involved the overall advance by Karver of approximately C$4.85m (€3.3m). Outsourcing-Pharma.com will continue to report the developments of the Inyx chronicle as and when they happen.

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