MIAMI, Dec 7 (Reuters) - A Miami businessman once named “Entrepreneur of the Year” by tax and consulting firm Ernst & Young was arrested on Friday and accused of leading a $40 million investment fraud linked to a company he owned that promoted a cutting-edge design to build low-cost houses.
Claudio Osorio, 54, the former president of InnoVida Holdings, and the firm’s former chief financial officer were indicted on two counts of wire fraud and one count of major fraud, among other charges, the U.S. Attorney’s Office in Miami said in a statement.
They also face fraud charges by the U.S. Securities and Exchange Commission for possible violations of federal securities laws.
Osorio’s arrest marks a dramatic fall from grace for a prominent and politically connected businessman whose now defunct company at one point claimed Jeb Bush, Florida’s former governor, among its board of directors, as well as former presidential candidate Gen. Wesley Clark.
Before it entered bankruptcy last year, the Miami Beach-based company drew some high-profile investor interest that included Chicago Bulls basketball star Carlos Boozer.
Osorio, who was born in Venezuela, pitched the company and its products as a possible solution to help build in developing countries affordable houses that were resistant to fire and hurricanes.
InnoVida, he said, manufactured fiber composite panels that could be used to build homes and other buildings without cement, steel or wood.
Prosecutors said that Osorio defrauded investors from 2007 to 2010, exaggerating the company’s finances and pocketing millions of dollars to fund a lavish lifestyle.
In a statement, the SEC claimed that Osorio had illegally used investor money to pay for a Miami Beach mansion, a Maserati car and a Colorado mountain retreat home.
Osorio was forced to sell many of his assets as the company slid into bankruptcy and some investors, concerned about the company’s finances, filed lawsuits against him, to get their money back.
Boozer was among them. Last year, he sued Osorio, claiming his $1 million investment had been used to bankroll the businessman’s “high-flying lifestyle,” according to court documents.
“From his lap of luxury, Osorio concocted a compelling story about InnoVida by recruiting an impressive board of directors and boasting a bogus financial condition to lure investors into funding his scheme of lies,” said Eric Bustillo, the director of the SEC’s Miami Regional Office.
The indictment by the U.S. Attorney’s Office in Miami said that Osorio and his former Chief Financial Officer Craig Toll, also applied for and obtained a $10 million loan from the Overseas Private Investment Corporation (OPIC), a U.S. government agency.
The loan was intended to help build a manufacturing facility in Haiti and 500 homes for families in Haiti after a devastating earthquake in 2010 left about 250,000 people dead and more than one million homeless.
Prosecutors said Osorio “used the OPIC loan proceeds to repay investors and for his and his co-conspirators’ personal benefit and to further the fraud scheme.”
In 1997, Ernst & Young awarded Osorio its “Entrepreneur of the Year” prize for his work at a previous company he owned, CHS Electronics. At the time, the company was one of the country’s leading electronics distributors.
In 1999, CHS Electronics said it had settled a class action lawsuit brought by some shareholders. A year later the company was declared bankrupt. (Edited by David Adams)