By Dan Christensen, BrowardBulldog.org
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.
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.