Westernbank v. Kachkar, RICO Amended Complaint

Case 3:07-cv-01606-ADC Document 3 Filed 08/23/2007 Page 1 of 54
UNITED STATES DISTRICT COURT

DISTRICT OF PUERTO RICO
____________________________________________ x
: 07 Civ.-1606 (ADC)
WESTERNBANK PUERTO RICO, :
: FIRST AMENDED COMPLAINT
:
Plaintiff, :
:
v. :
:
JACK KACHKAR, :
STEVEN HANDLEY, :
COLIN HUNTER, :
JAY M. GREEN, :
RIMA GOLDSHMIDT, :
VIKTORIA BENKOVITCH, and :
INYX, INC., :
:
:
Defendants. :
____________________________________________ x
Plaintiff Westernbank Puerto Rico (“Westernbank”), for its First Amended
Complaint (“Complaint”) against the above-listed Defendants, alleges as follows:
INTRODUCTION
1. This is an action brought for violations of the federal Racketeer Influenced
and Corrupt Organizations Act (“RICO”), the laws of the Commonwealth of Puerto Rico, and
numerous contractual obligations owed to Westernbank. Westernbank, through its asset-based
lending division (Westernbank Business Credit), loaned over $142 million to Inyx, Inc. (“Inyx”)
and its subsidiaries (collectively, the “Inyx Companies”), all of which were under the operation
and control of Defendants Jack Kachkar, Steven Handley, Colin Hunter, Jay M. Green, and Rima
Goldshmidt (the “Inyx Operators”). The Inyx Operators, however, caused the Inyx Companies
to systematically defraud Westernbank so that they could obtain funding from Westernbank
under false pretext and thereafter use the funding, among other things, to enrich the Inyx
MI1:\190966\01\43CM01!.DOC\80741.0003
Operators and to give the false impression that Inyx was a viable enterprise. Westernbank now
seeks to recover damages it suffered as a result of the myriad fraudulent and material
misrepresentations made or caused to be made to it by the Inyx Operators and as a result of all
the Defendants’ refusals to comply with their contractual obligations, including obligations under
various guarantees and security agreements described below. Westernbank’s damages, without
even taking into account interest, attorneys’ fees, costs and trebled damages under RICO, exceed
$142 million.
2. Under the terms of the Inyx loan agreements described in more detail
below, Westernbank agreed (among other things) to provide lines of credit to several of the Inyx
Companies that they could draw down upon based on a percentage of their accounts receivable,
as evidenced by invoices and reports provided by the Inyx Companies to Westernbank Business
Credit (“WBC”).1 The loan agreements’ terms also required the Inyx Companies to direct their
customers to make payments on their accounts not to an Inyx Company, but instead to a WBC-
controlled lock box account, the proceeds of which would be used in part to pay down the loan
obligations of the Inyx Companies to WBC.
3. The Inyx Operators caused the Inyx Companies to abuse and misuse these
procedures in a variety of ways in order to defraud and steal money from Westernbank. For
example, the Inyx Operators caused the Inyx Companies to submit fraudulent invoices to WBC
so that they could misappropriate additional funds under their lines of credit. To this end, the
Inyx Companies submitted duplicate invoices to WBC, even though the Inyx customer would
only pay on one of the invoices. The Inyx Companies also submitted fake invoices to WBC that
were never sent to Inyx customers. The Inyx Operators represented or caused others to represent
1
WBC is not a legal entity separate from Westernbank, but a division of Westernbank.
2
to WBC that all of these invoices were real and legitimate, but the Inyx Companies also
maintained internal books and records, hidden from WBC, reflecting the true fact that these
invoices were fraudulent and uncollectible.
4. The Inyx Operators also surreptitiously caused Inyx customers to direct
payments which should have been paid into the lock box account for Westernbank’s benefit into
other bank accounts controlled by the Inyx Operators and free of Westernbank’s control. The
money in these accounts, which should have been provided to WBC to pay down the Inyx
Companies’ debt, was instead paid out to, among others, Inyx and Kachkar. Those diversions of
funds occurred on numerous occasions, involved several different Inyx customers, and totaled
tens of millions of dollars. The Inyx Operators concealed these diversions from WBC by
providing it with records showing that these sums were still owed from customers when, in fact,
they had been paid by the customers into accounts other than the lock box account. Once again,
the Inyx Companies secretly maintained internal books and records, hidden from WBC,
reflecting the true fact that customers had paid these sums.
5. Another fraudulent scheme by the Inyx Operators was to cause certain
Inyx Companies to offset accounts receivables owed to them from their customers against debts
the Inyx Companies owed to the customers. Under the terms of the loan agreements, this was
impermissible because the accounts receivable had been assigned to Westernbank; the Inyx
Companies had no right to extinguish these accounts receivable in exchange for customers
extinguishing debts the Inyx Companies owed them. Such offsets occurred on numerous
occasions, involved several different Inyx customers, and totaled over $15 million.
6. All told, the Inyx Operators, through their pattern of fraud, caused the
Inyx Companies to amass a huge indebtedness under their loan agreements with Westernbank
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that the Companies cannot now satisfy, nor can the Inyx Companies otherwise comply with the
provisions of their loan agreements. As a consequence, the loans are now all in default,
Westernbank is owed over $142 million, and Westernbank is entitled to collect this amount (and
more) from Defendants in this action under RICO, the laws of the Commonwealth of Puerto
Rico, and the loans, guarantees, pledges and security agreements of Defendants.
JURISDICTION AND VENUE
7. The Court has jurisdiction over the First and Second Causes of Action
under 18 U.S.C. § 1964 (RICO) and 28 U.S.C. § 1331 (federal question jurisdiction). The Court
has jurisdiction over the remaining causes of action under 28 U.S.C. § 1332 (diversity
jurisdiction) because Westernbank is a citizen of Puerto Rico (which is defined as a “State” for
the purpose of 28 U.S.C. § 1332), each Defendant is a citizen of either another State or a foreign
Nation, and the amount in controversy exceeds $142 million.
8. Venue is proper in this Court under 18 U.S.C. § 1965(a) and 28 U.S.C.
§ 1391. Additionally, in a number of the agreements described in more detail below, the parties
consented to the jurisdiction of the United States District Court for the District of Puerto Rico
and waived any venue objections to an action instituted in this court arising under or relating to
the agreements or the relationship between the parties.
PARTIES
9. Westernbank is a Puerto Rico banking corporation with its principal place
of business in Puerto Rico. It is a financial institution insured by the Federal Deposit Insurance
Corporation.
10. Jack Kachkar is a Canadian citizen who resides in Florida.
11. Steve Handley is a United Kingdom citizen who resides in Great Britain.
12. Colin Hunter is a United Kingdom citizen who resides in Great Britain.
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13. Jay M. Green is a United States citizen who resides in New York.
14. Rima Goldshmidt is a Canadian citizen who resides in Canada.
15. Viktoria Benkovitch is a Canadian citizen who resides in Florida.
16. Inyx is a Delaware corporation with its principal place of business in New
York.
FACTUAL BACKGROUND
. Westernbank’s Financing Arrangements With the Inyx Companies.
. The USA Loan Agreement.
17. On March 31, 2005, Inyx and its wholly-owned subsidiary, Inyx USA Ltd.
(“Inyx USA”), entered into a Loan and Security Agreement (as amended, the “USA Loan
Agreement”) (attached Exhibit 1) with Westernbank.
18. The USA Loan Agreement was signed by Kachkar (as Chairman of the
Board and Chief Executive Officer of Inyx and as Director of Inyx USA) and Goldshmidt (as
secretary of Inyx and a director of Inyx USA).
19. In May, 2005, Inyx Pharma Ltd. (“Inyx Pharma”), which is also a wholly
owned subsidiary of Inyx, signed an amendment to the USA Loan Agreement (attached Exhibit
2), and became a co-borrower under that Agreement. Inyx, Inyx Pharma and Inyx USA are
referred to hereinafter as the “USA Borrowers.”
20. Under the USA Loan Agreement, Westernbank agreed to lend, subject to
the conditions set forth therein, up to $46 million to the USA Borrowers, consisting of a $10
million revolving loan and four separate term loans in the aggregate amount of $36 million.
21. Westernbank agreed to provide the USA Borrowers with such credit
facilities and revolving loans under the USA Loan Agreement (a) to finance Inyx USA’s
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purchase of the assets and business of Aventis Pharmaceutical Puerto Rico, Inc.; and (b) for
working capital and other proper corporate purposes provided in the Agreement.
22. As further evidence of the $36 million of term loans under the USA Loan
Agreement, the USA Borrowers made four separate Secured Notes dated March 31, 2005 (the
“Notes”) (attached Exhibit 3) in favor of Westernbank, in the aggregate principal amount of $36
million, payable in the manner and on the terms set forth therein.
23. To secure the payment and performance of all their obligations under the
USA Loan Agreement, as defined therein (the “USA Loan Obligations”), the USA Borrowers
granted to Westernbank a security interest over all or nearly all of their assets.2
2
The security interests granted to Westernbank covered (1) all accounts, (2) all present and
future general intangibles, including all intellectual property, (3) all inventory, (4) all equipment,
(5) all real property and fixtures, and all “Real Estate Security,” (6) all chattel paper, including
all tangible and electronic chattel paper, (7) all instruments, including all promissory notes, (8)
all documents, (9) all deposit accounts, (10) all letters of credit, banker’s acceptances and similar
instruments, including all letter of credit rights, (11) all supporting obligations and all present
and future liens, security interests, rights, remedies, title and interest in, to and in respect of
receivables and other collateral, including (a) rights and remedies under or relating to guaranties,
contracts of surety ship, letters of credit and credit and other insurance related to the collateral,
(b) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies
of an unpaid vendor, lienor or secured party, (c) goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or evidencing, receivables or
other collateral, including returned, repossessed and reclaimed goods, and (d) deposits by and
property of account debtors or other persons securing the obligations of account debtors, (12) all
investment property (including securities, whether certificated or uncertificated, securities
accounts, security entitlements, commodity contracts or commodity accounts), and monies credit
balances, deposits and other property of the USA borrowers, now or hereafter held or received
by or in transit to Westernbank or at any other depository or other institution from or for the
account of the USA Borrowers, whether for safekeeping, pledge, custody, transmission,
collection or otherwise, (13) all commercial tort claims, including, without limitation, those
identified in the “Information Certificate,” (14) to the extent not otherwise described above, all
receivables and all goods, (15) all records, (16) the leases of all premises leased by the USA
Borrowers (including all assignment thereof), (17) all motor vehicles, (18) all shares of capital
stock of each subsidiary of the USA Borrowers, and the certificates representing those shares,
(19) assignment of proceeds from the “Manufacturing Contracts,” including rents, and (20) all
products and proceeds of the foregoing in any form, including insurance proceeds and all claims
against third parties for loss or damage to or destruction of or other involuntary conversion of
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24. Westernbank properly perfected its security interests granted by the USA
Borrowers under the USA Loan Agreement.
25. In connection with the USA Loan Agreement, the USA Borrowers and
another Inyx subsidiary, Inyx Canada Inc. (“Inyx Canada”), executed various other agreements
that guaranteed payment of the USA Loan Obligations and provided security interests to
Westernbank to secure the performance of the USA Loan Obligations, including:
(a) Inyx Pharma and Inyx Canada executed a Corporate Guaranty dated
March 31, 2005 (the “USA Guarantee”) (attached Exhibit 4) in which they
provided a joint and several guarantee to Westernbank and an agreement
to be liable for the full performance of the USA Loan Obligations.
(b) The USA Borrowers executed a Patent Security Agreement dated March
31, 2005 (attached Exhibit 5) which provided Westernbank a continuing
security interest in all of their patents and patent applications, all of their
general intangibles and all intangible, intellectual or other similar property
and certain other interests in their collateral as defined therein.
(c) Inyx executed a Pledge and Security Agreement dated March 31, 2005
(attached Exhibit 6) in which it pledged and granted a continuing lien and
security interest to Westernbank in all of the capital stock of Inyx Canada.
(d) The USA Borrowers executed a Trademark Collateral Assignment and

Security Agreement dated March 31, 2005 (attached Exhibit 7) in which
they provided to Westernbank all trademarks held by them as a security
interest for performance of the USA Loan Obligations.
(e) The USA Borrowers executed a Collateral Assignment of Manufacturing

Agreements dated March 31, 2005 (attached Exhibit 8) which assigned to
Westernbank, for the purpose of securing performance of all USA Loan
Obligations, all of their rights and interests under certain manufacturing
agreements described therein.3
any kind or nature of any or all of the other collateral and any indemnities, warranties and
guaranties payable by reason of loss or damage to or otherwise with respect to any of the
foregoing items.
3
Inyx USA also executed a Mortgage Note Pledge and Security Agreement dated March
31, 2005 which provided a pledge of certain collateral to Westernbank which could be foreclosed
upon if an Event of Default under the USA Loan Agreement occurred and was continuing.
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26. Under Section 10.1 of the USA Loan Agreement, the occurrence or
existence of any of the following events (among others) constituted an “Event of Default”:
Borrower (i) fails to pay when due any of the Obligations (including any
mandatory prepayment of Term Loan D or any Voluntary Prepayment, notice of
intent to pay has been given by Borrower to Lender) or (ii) Borrower fails to
perform any of the terms, covenants, conditions or provisions contained in this
Agreement or any of the other Financing Agreements except those described in
Section 10(a)(i) above and such failure shall continue for ten (10) days; except
that, such ten (10) day cure period shall not be applicable in the case of (A) any
failure which cannot be cured at all or within such ten (10) day period, ( B) an
intentional breach by Borrower or (C) a failure which has been the subject of a
prior failure within the preceding three (3) months.
[A]ny representation, warranty or statement of fact made by Borrower to Lender

in this Agreement, the other Financing Agreements or any other agreement,
schedule, confirmatory assignment or otherwise shall when made or deemed
made be false or misleading in any material respect.
[A]ny Obligor revokes, terminates or fails to perform any of the terms, covenants,
conditions or provisions of any guarantee, endorsement or other agreement of
such party in favor of Lender or any representation, warranty or statements of fact
made by any such Person in any such document shall when made or deemed made
be false or misleading in any material respect.
[A] case or proceeding under the bankruptcy laws of the United States of America
now or hereafter in effect or under any insolvency, reorganization, receivership,
readjustment of debt, dissolution or liquidation law or statute of any jurisdiction
now or hereafter in effect (whether at a law or equity) is filed by Borrower or any
Obligor or for all or any part of its property.
[T]here shall be a material adverse change in the business, assets or prospects of

Borrower or any Obligor after the date hereof.
[T]here shall be an event of default under any of the other Financing Agreements.
27. If an Event of Default occurs under the USA Loan Agreement,
Westernbank is entitled under the Agreement to accelerate all amounts due and owed to it and
demand immediate payment from the USA Borrowers.
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. The EU Loan Agreement.
28. On August 31, 2005, Inyx Europe Limited (“Inyx EU”) and Ashton
Pharmaceuticals Limited, f/k/a Celltech Manufacturing Services Limited (“Ashton”), entered
into a Loan and Security Agreement (as amended, the “EU Loan Agreement”) with Westernbank
(attached Exhibit 9). Inyx EU and Ashton are referred to hereinafter as the “EU Borrowers.”
29. The EU Loan Agreement was signed by Kachkar and Green as directors of
both Inyx EU and Ashton.
30. Under the EU Loan Agreement, Westernbank agreed to lend up to $35.5
million, consisting of a revolving credit line of up to $11.7 million and term loans to Inyx EU in
the aggregate amount of $24.8 million, pursuant to four promissory notes. Westernbank agreed
to provide Inyx EU with credit facilities, revolving loans and financial accommodations: (a) to
finance Inyx EU’s purchase of all issued and outstanding shares of capital stock of Ashton from
a third party seller to acquire Ashton’s business and assets; and (b) for working capital and other
proper purposes provided in the EU Loan Agreement.
31. To secure the payment and performance of all obligations under the EU
Loan Agreement, as defined therein (the “EU Loan Obligations”), the EU Borrowers granted to
Westernbank a security interest in all, or nearly all, of their assets.4
4
The security interests granted to Westernbank covered (1) all accounts, (2) all present and
future general intangibles, including all intellectual property, (3) all inventory, (4) all equipment,
(5) all real property and fixtures, and all “Real Estate Security,” (6) all chattel paper, including
all tangible and electronic chattel paper, (7) all instruments, including all promissory notes, (8)
all documents, (9) all deposit accounts, (10) all letters of credit, banker’s acceptances and similar
instruments, including all letter of credit rights, (11) all supporting obligations and all present
and future liens, security interests, rights, remedies, title and interest in, to and in respect of
receivables and other collateral, including (a) rights and remedies under or relating to guaranties,
contracts of surety ship, letters of credit and credit and other insurance related to the collateral,
(b) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies
of an unpaid vendor, lienor or secured party, (c) goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or evidencing, receivables or
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32. Westernbank properly perfected its security interests granted by the EU
Borrowers under the EU Loan Agreement.
33. If an Event of Default occurs under the EU Loan Agreement, Westernbank
is entitled under the Agreement to accelerate all amounts due and owed to it and demand
immediate payment by the EU Borrowers.
34. On August 31, 2005, the USA Borrowers and the EU Borrowers also
executed a Cross Default Agreement-Security Agreement with Westernbank (“Cross Default
Agreement”) (attached Exhibit 10), whereupon the parties agreed that:
(a) An Event of Default under the USA Loan Agreement would be considered
an Event of Default under the EU Loan Agreement, and vice versa;
(b) In the case of an Event of Default under either Loan Agreement,

Westernbank may exercise all of its rights and remedies under the other
Loan Agreement, including, without limitation, the right to terminate the
other Loan Agreement; and
(c) All of the collateral under the USA Loan Agreement shall also serve as
collateral and security under the EU Loan Agreement (with Westernbank
other collateral, including returned, repossessed and reclaimed goods, and (d) deposits by and
property of account debtors or other persons securing the obligations of account debtors, (12) all
investment property (including securities, whether certificated or uncertificated, securities
accounts, security entitlements, commodity contracts or commodity accounts), and monies credit
balances, deposits and other property of the EU Borrowers, now or hereafter held or received by
or in transit to Westernbank or at any other depository or other institution from or for the account
of the EU Borrowers whether for safekeeping, pledge, custody, transmission, collection or
otherwise, (13) all commercial tort claims, including, without limitation, those identified in the
Information Certificate, (14) to the extent not otherwise described above, all receivables and all
goods, (15) all records, (16) the leases of all premises leased by the EU Borrowers (including
assignment thereof), (17) all motor vehicles, (18) all shares of capital stock of each subsidiary of
the EU Borrowers, and the certificates representing such shares, (19) all “Manufacturing
Contracts” and assignment of proceeds of all Manufacturing Contracts, (20) all licenses, and (21)
all products and proceeds of the foregoing, in any form, including insurance proceeds and all
claims against third parties for loss or damage to or destruction of or other involuntary
conversion of any kind of nature of any or all of the other collateral and any indemnities,
warranties and guaranties payable by reason of loss or damage to or otherwise with respect to
any of the foregoing items.
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receiving a continuing general lien and security interest therein as security

for the EU Loan Obligations), and vice versa.
35. The USA Borrowers executed a Guarantee dated August 31, 2005
(attached Exhibit 11) and a Guarantor General Security Agreement dated August 31, 2005
(attached Exhibit 12) (collectively, the “EU Guarantee”), whereby each guaranteed “the payment
and performance of all now-existing and hereafter arising obligations, liabilities and
indebtedness” of the EU Borrowers under the EU Loan Agreement.
36. Westernbank and the EU Borrowers further executed other security
agreements that guaranteed to Westernbank performance of all EU Loan Obligations. These
included a Collateral Assignment of Claims and a Collateral Assignment of Licenses by the EU
Borrowers, both assignments dated August 31, 2005.5
. Secured Over Formula Advance Loan.
37. On October 24, 2005, Inyx sought and received a $5 million Secured Over
Formula Advance Loan from WBC for working capital to purchase new inventory. The loan
was to be guaranteed by inventory one of the Inyx Companies was to purchase pursuant to
existing purchase orders. The Inyx Companies, however, never reported such inventory to
WBC, and the underlying purchase orders were fraudulent. In addition, while the loan has long
since been due and owing, the loan has never been repaid.
. Guarantees of the Individual Defendants.
. The Fraud Guarantees.
38. On or about March 31, 2005, the Inyx Operators each executed guarantees
in which each agreed to be liable jointly and severally to Westernbank for “any damage or loss
5
In addition, Inyx Canada executed a Guarantee dated August 30, 2005 in which it
guaranteed the performance and payment of all obligations owed by the EU Borrowers under the
EU Loan Agreement
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which [Westernbank] may sustain as a result of any fraud, deceit or criminal act on the part of
[the USA Borrowers] or any officer, employee, or agent of [the USA Borrowers].” On or about
August 30, 2005, Kachkar, Green and Goldshmidt each executed similar guarantees covering
fraud, deceit or criminal acts by Inyx, the EU Borrowers, or any officer, employee or agent of
Inyx or the EU Borrowers. All of these guarantees are referred to hereinafter as the “Fraud
Guarantees” (attached Exhibit 13).
. The Personal Guarantees.
39. On June 7, 2007, Kachkar and Benkovitch executed an Amended and
Restated Limited Guarantee (the “First Personal Guarantee”) (attached Exhibit 14) guaranteeing,
with certain limits as detailed in the First Personal Guarantee, all obligations of the USA
Borrowers and the EU Borrowers to Westernbank under both the USA and EU Loan Agreements
(collectively, the “Loan Agreements”), up to $30.1 million. The First Personal Guarantee was
given “in substitution” of earlier guarantees provided by Kachkar and Benkovitch dated as of
March 7, 2007 in the amount of $8 million and November 17, 2006 in the amount of $10 million.
40. On June 20, 2007, Kachkar and Benkovitch executed an additional
Limited Guarantee (the “Second Personal Guarantee”) (attached Exhibit 15) guaranteeing, with
certain limits as detailed in the Second Personal Guarantee, all obligations of the USA and EU
Borrowers to Westernbank under the Loan Agreements in an amount equal to the sum of $70
million plus the amount that the repayment obligations under the Loan Agreements exceeded
$142.4 million. This Guarantee was “in addition to and not in substitution of” the First Personal
Guarantee for $30.1 million, which remained “continuously in effect.”
41. Also on June 20, 2007, Kachkar and Benkovitch executed a Collateral
Deficiency Letter (attached Exhibit 16), through which Kachkar and Benkovitch agreed to
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provide certain collateral (the “Mining Collateral,” as defined in the Collateral Deficiency Letter)
sufficient to cover the amount of the collateral deficiency under the Loan Agreements.
. The Inyx Operators’ Fraudulent Conduct.
. Schemes Involving Fraudulent Invoices.
42. To withdraw funds from the revolving lines of credit under the Loan
Agreements, the Inyx Companies were required to submit information derived from and copies
of accounts receivable invoices for each Inyx operating subsidiary to WBC. The Inyx
Companies would thereafter be permitted to withdraw funds from the lines of credit equal to a
certain percentage of eligible accounts receivable. This process would start by the operating
subsidiaries transmitting their accounts receivable invoices to Goldshmidt on a daily basis over
the international wires. Goldshmidt thereafter prepared or caused others to prepare assignment
sheets that listed the invoices received. The assignment sheets were then submitted to WBC over
national and international wires. Goldshmidt further caused copies of the invoices to be
transmitted from Inyx to WBC over national and international wires. On a regular basis, one of
the Inyx Operators also caused Inyx to transmit to WBC over national or international wires the
accounts receivable reports that provided summations and tabulations of the earlier submitted
documentation. If WBC determined, after reviewing the information, that sufficient collateral in
the form of eligible accounts receivable existed to allow and secure further funding to the USA
or EU Borrowers, WBC would authorize additional funds to be advanced to the Inyx Companies
under the lines of credit.
43. Beginning in 2005 and lasting until June 2007, the Inyx Operators
engaged in a series of schemes involving the submission of duplicate, inaccurate, altered, and/or
false invoices to WBC in order to fraudulently increase their reported accounts receivable so that
WBC would make additional funding available to Inyx under the Loan Agreements’ revolving
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lines of credit. The Inyx Operators caused these fraudulent invoices to be sent to WBC with full
knowledge that the invoices did not reflect accurately the accounts receivable of the Inyx
Companies, and with the intent to defraud Westernbank.
. Fraudulent “Prefix 7” Invoices.
44. Among the invoices that the Inyx Operators caused Inyx to submit to
WBC were a group of invoices that bore a prefix number 7 (the “Prefix No. 7 Invoices”). The
Prefix No. 7 Invoices purported to reflect large accounts receivable owed to the Inyx Companies
by a variety of customers, including Dr. Ready Labs Limited (“Dr. Ready Labs”), Novozymesa
Delta, UCB Pharma Limited (“UCB”), Link Pharmaceutical Limited (“Link”), and McDormott
Labs. A number of these Prefix No. 7 Invoices, totaling more than £7 million, were submitted to
WBC so that Inyx could obtain additional financing from WBC.
45. Most, if not all, of these Prefix No. 7 Invoices were fraudulent. The Inyx
Companies’ internal accounts receivable ledgers did not reflect these invoices. There is no
evidence that these invoices were ever sent to customers or that any of these invoices were ever
paid, and in fact the invoices were later canceled. Thus, these invoices did not reflect actual
accounts receivables due to the Inyx Companies. The Inyx Operators knowingly and
intentionally created or caused others to create these Prefix No. 7 Invoices, and submitted or
caused others to submit these invoices to WBC for the purposes of fraudulently obtaining
financing under the Loan Agreements.
46. The fraudulent Prefix No. 7 Invoices discovered by Westernbank to date
are invoice 704007, dated August 16, 2006, for approximately £124,500.00 to Dr. Ready Labs;
invoice 704008, August 16, 2006, for approximately £286,000.00 to Dr. Ready Labs; invoice
704009, dated August 16, 2006, for approximately £125,000.00 to Dr. Ready Labs; invoice
704010, dated August 22, 2006, for approximately £467,000.00 to Novozymes; invoice 704011,
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dated August 25, 2006, for approximately £540,000.00 to UCB; invoice 704012, dated August
30, 2006, for approximately £450,000.00 to UCB; invoice 704013, dated July 9, 2006, for
approximately £242,000.00 to UCB; invoice 704014, dated July 9, 2006, for approximately
£440,000.00 to Novozymes; invoice 70415, dated September 15, 2006, for approximately
£400,000.00 to Link; invoice 704016, dated September 19, 2006, for approximately £300,000.00
to UCB; invoice 704017, dated September 20, 2006 for approximately £660,000.00 to
Novozymes; invoice 704018, dated October 5, 2006 for approximately £719,000.00 to UCB;
invoice 704019, dated October 20, 2006, for approximately £326,000.00 to UCB; invoice
704020, dated October 24, 2006, for approximately £115,000.00 to McDermott Labs; invoice
704021, dated October 24, 2006, for approximately £444,000.00 to Novozymes; invoice 704022,
dated October 26, 2006, for approximately £476,000.00 to McDermott Labs; and invoice
704023, dated November 21, 2006, for approximately £657,000.00 to UCB. All of the invoices
described in this paragraph were submitted to WBC to obtain additional financing but do not
appear in the Inyx internal ledgers.
. Re-Invoicing.
47. The Inyx Operators also engaged in a scheme and practice of issuing
multiple invoices for the same projects. In furtherance of this scheme, they would cause the Inyx
Companies to issue a single invoice for the total amount a customer would owe once work on the
project was completed. This invoice would then be sent to WBC, and recorded in the accounts
receivable reports the Inyx Operators supplied or caused others to supply to WBC for the
purpose of obtaining funding under the Loan Agreements.
48. Subsequently, the Inyx Operators caused the Inyx Companies to issue
additional invoices on the same account receivable that would subdivide the amount owed under
the original invoice. The Inyx Operators submitted the new invoices to WBC for financing, and
15
recorded these new invoices, as they had with the original invoices, in the accounts receivable
reports submitted to WBC. As a result, the Inyx Companies fraudulently obtained disbursements
under the Loan Agreements twice for the same accounts receivable.
49. At about or after the date the additional invoices were issued, the Inyx
Operators would cause the Inyx Companies to issue credit notices canceling the payments
customers owed under the original invoice for the entire project. These credit notices, however,
were not reported to WBC, and the reports Inyx provided to WBC would still reflect the original
invoices.
50. This scheme involved numerous separate occurrences between October
2005 and June 2007 at the Inyx Pharma facility in the United Kingdom, and pursuant to this
scheme, the Inyx Operators submitted or caused others to submit invoices totaling at least
approximately £3 million to WBC for the purpose of fraudulently obtaining funding under the
Loan Agreements.
51. For example, the Inyx Operators caused invoice number OP/1001215 for
approximately £140,00.00 relating to Inyx Pharma’s customer Genpharm to be issued on July 14,
2006. Invoice OP/1001215 was subsequently submitted to WBC for financing. Later the Inyx
Operators caused Genpharm invoice OP/1001354, dated November 20, 2006, for £68,964.00 and
Genpharm invoice OP/1001369, dated November 24, 2006, for £66,472.00 to be issued and later
submitted to WBC for financing. Invoices OP/1001354 and OP/1001369 were for the same
project as invoice OP/1001215. Later, the Inyx Operators caused invoice OP/1001215 to be
canceled pursuant to a credit note dated January 25, 2007 for £140,00.00, and canceled the
invoice in the Inyx internal ledgers, but the Inyx Operators withheld the credit note from WBC.
16
52. Another example of this scheme involves Inyx Pharma’s customer Ecolab
(formerly known as Adams Healthcare). The Inyx Operators caused invoice OP/1001228, dated
July 27, 2006, for £162,108.37 and invoice OP/1001229, dated July 28, 2006, for £200,776.42 to
be issued and subsequently submitted to WBC for financing. Thereafter, between August 2006
and February 2007, the Inyx Operators caused the following invoices for the same
Ecolab/Adams Healthcare project to be created and submitted to WBC for financing:
OP/1001263 for approximately £18,000.00; OP/1001265 for approximately £19,800.00;
OP/1001403 for approximately £19,200.00; OP/1001428 for approximately £40,700.00; and
OP/1001464 for approximately £19,900.00. On January 24, 2007, the Inyx Operators caused
credit notes to be issued canceling in full the original July 2006 invoices for the Ecolab/Adams
Healthcare project and also canceled the original invoices in the Inyx internal ledgers, but the
Inyx Operators withheld these credit notes from WBC.
. Developmental Invoices.
53. As a further related but separate scheme, the Inyx Operators engaged in a
practice involving the creation of invoices for so-called “developmental work” one or more of
the Inyx Companies was supposedly performing for customers. These fraudulent
“developmental” invoices were not part of the normal invoicing practice for the Inyx Companies.
For example, Inyx employees did not send these invoices directly to customers, but instead
delivered them to Handley for distribution. Most of these invoices were never submitted to
customers, and most of the corresponding customer quotes for the “developmental projects” did
not have the required customer signatures. In fact, employees ordinarily responsible for
developmental work in the Inyx Companies’ United Kingdom facilities have recently admitted
17
that they never heard of the names of some of the customers identified in the developmental
invoices. The Inyx Operators also instructed Inyx Companies employees, including their credit
department employees, not to pursue payment from the customers named on these
“developmental” invoices.
54. After the Inyx Operators created or caused others to create the fraudulent
developmental invoices, they submitted or caused others to submit the invoices to WBC and to
have the invoices reflected on the accounts receivable reports provided to WBC. These invoices
were submitted to WBC for the purpose of fraudulently obtaining funding under the Loan
Agreements. Subsequently, the Inyx Operators canceled or caused others to cancel the payments
“owed” by the customers under the developmental invoices. Also, while the £19.4 million in
developmental invoices remained on the accounts receivable reports Inyx submitted to WBC, the
Inyx Operators removed or caused others to remove the entries for these invoices from Inyx’s
internal accounts receivable ledgers. These acts were taken by the Inyx Operators with full
knowledge that the developmental invoices were false, and with the intention of defrauding
Westernbank.
55. For example, beginning in or around December 2005, Inyx Pharma
generated developmental invoices totaling £8 million for its customer King Pharmaceuticals that
were used by Inyx to secure additional financing from WBC through the revolving lines of
credit. Subsequently, the Inyx Operators caused these invoices to be cancelled and the entries
for the invoices to be removed from Inyx’s internal accounts receivable ledgers even though the
invoices remained on the accounts receivable reports the Inyx Operators caused to be submitted
by Inyx to WBC.
18
56. Another example of the developmental invoice scheme relates to a
purported developmental project for Meda. This scheme began around October 2005 and
continued until June 2006. The developmental invoices for Meda, which covered technical
transfer fees associated with Ashton’s potential acquisition of a German pharmaceutical business
(which never materialized), totaled approximately £2.5 million. The Meda developmental
invoices were canceled as of December 31, 2006. After canceling these developmental invoices,
the Inyx Operators removed or caused others to remove the invoices from Inyx’s internal
accounts receivable ledgers, but they intentionally did not timely inform WBC of the
cancellations or correct the accounts receivable reports provided to WBC.
. Inflated Invoices.
57. Another related example of the Inyx Operators’ fraudulent schemes is the
submission of inflated invoices to enable the Inyx Companies to withdraw additional monies
from the revolving credit lines. Once again, the result of this scheme was that the Inyx Operators
fraudulently increased the amount of accounts receivable that they submitted or caused others to
submit to WBC for the purpose of fraudulently obtaining additional funding under the Loan
Agreements.
58. As an example of the Inyx Operators’ inflated invoicing schemes, in or
around May 2006, the Inyx Operators caused the submission of invoices and accounts receivable
reports to WBC for invoices relating to the UCB-Ashton Contract Manufacturing Agreement
dated August 25, 2005 (the “UCB Agreement”). Pursuant to the Agreement, UCB owed Ashton
a receivable per month based upon the level of sales of specific products sold by Ashton to UCB.
The UCB Agreement fixed the annual amount for the year ending August 31, 2006 at £4.2
million. The accounts receivable reports the Inyx Operators submitted or caused to be submitted
to WBC identified three different invoices owed in May 2006 by UCB to Ashton pursuant to the
19
UCB Agreement. The total amount of these invoices the Inyx Operators submitted to WBC for
financing was approximately £1.037 million. However, the actual amount owed under the UCB
Agreement for May 2006 was only £437,564.00. The Inyx Operators subsequently cancelled or
caused others to cancel the May 2006 invoices except for the £437,564.00 actually owed by
UCB, but the accounts receivable reports submitted by Inyx to WBC did not reflect these
cancellations.
59. Another related example of this scheme involved the July 2006 invoices
under the UCB Agreement. By June 2006, the full amount for the year ending August 31, 2006
that UCB had to pay under the Agreement (£4.2 million) had already been invoiced to UCB.
Therefore, the Inyx Companies were not entitled to any more receivables from UCB pursuant to
the Agreement in July 2006, and the Inyx Companies’ internal accounts receivable reports do not
record any such invoices. Nevertheless, the Inyx Operators caused an invoice for £658,000.00,
represented to be for payment due under the UCB Agreement, to be submitted to WBC in July
2006 for the purpose of fraudulently obtaining additional funding under the Loan Agreements.
. Diversions of Accounts Receivable Payments.
60. Pursuant to the Loan Agreements, lock box accounts (“Lock Box
Accounts”) were established into which the USA and EU Borrowers were required to “promptly
deposit and direct their account debtors, to directly remit all payments on Receivables, including
Accounts and all payments constituting proceeds of Inventory, Equipment or other Collateral in
the identical form in which such payments are made, whether by cash, check or other manner.”
The Agreements make all money required to be deposited into the Lock Box Accounts the
property of Westernbank.
61. A further part of the Inyx Operators schemes to defraud Westernbank was
the diversion of accounts receivable payments that were owned by Westernbank and which
20
should have been deposited into a Lock Box Account to other bank accounts controlled by the
Inyx Operators rather than Westernbank. The Inyx Operators caused the diversions of these
payments to take place with the full knowledge that the Inyx Companies had previously
submitted invoices to WBC for these accounts receivables to obtain financing under the Loan
Agreements.
. Diversion Scheme at Inyx Pharma.
62. One of the schemes the Inyx Operators employed was to cause payments
from customers of Inyx Pharma that were supposed to be made to a Lock Box Account to instead
be directed to Inyx Pharma’s operational account at Barclays Bank. Beginning in October 2006,
the Inyx Operators knowingly and intentionally caused over £2 million belonging to
Westernbank which should have been deposited in a Lock Box Account to be diverted from and
not paid into the Lock Box Account.
63. For example, in furtherance of the Inyx Operators’ overall scheme, on
December 12, 2006, Handley instructed Generics UK, Ltd. to make a payment of £352,926.53.00
to Account Number 00402087 at Barclays UK (Sort Code 20-48-46) held in the name of Inyx
Pharma and controlled by the Inyx Operators. On December 21, 2006, Generics UK confirmed
that payment had been made to Inyx Pharma through wire transfer number 4600001574. That
payment was the property of Westernbank and should have been made into a Lock Box Account.
64. As further examples of these schemes at least £246,000.00 in accounts
receivable payments from Proctor & Gamble Pharma SARL (“P&G”) was diverted from the
WBC Lock Box Account between October 2006 and June 2007 and was deposited into Inyx
Pharma’s account at Barclays Bank. Similarly, during this same time period, at least
£211,000.00 in accounts receivable payments from AstraZeneca AB were diverted away from
the WBC Lock Box Account into accounts controlled by the Inyx Operators.
21
65. To date, Westernbank has identified at least thirteen Inyx Pharma
customers whose payments the Inyx Operators diverted or caused to be diverted from and not
paid into the WBC Lock Box Account. These customers are Medlock Medical Ltd., Generics
(UK) Ltd., Bracey’s Pharmaceuticals Ltd., Merck SA, P&G, Chiesi Pharmaceuticals SpA,
Animalcare, Manx Healthcare, UCB, Bioprogress Technology Ltd., Alliance Pharmaceuticals
Ltd., AstraZeneca AB and Antigen.
. Diversion Scheme at Ashton.
66. Also beginning in or around October 2006, the Inyx Operators engaged in
a scheme to have customers of Ashton deposit payments directly into Ashton’s operational
accounts, rather than into the WBC Lock Box account.
67. For example, on January 25, 2007, Handley instructed Richard Grethe
from Focus Pharmaceuticals Ltd. (“Focus”) to pay £178,048.00 to National Westminster Bank
account number 71111433 held in the name of Ashton and controlled by the Inyx Operators.
Handley knowingly and intentionally instructed Grethe to divert these funds to the Ashton
account, with full knowledge that this payment was the property of Westernbank. In
consideration for this diversion, Handley extended Focus a discount of the payment.
68. Additionally, for the period from October 2006 to February 2007 at least
£262,500.00 in accounts receivable payments from Ashton’s customer Galen Ltd. were diverted
from the WBC Lock Box Account into a bank account controlled by the Inyx Operators.
Similarly, in this same time period, at least £146,800.00 in accounts receivable payments from
Ashton’s customer Kogen were diverted away from the WBC Lock Box Account into accounts
controlled by the Inyx Operators.
69. To date, WBC has identified at least fifteen Ashton customers whose
payments the Inyx Operators diverted or caused to be diverted from the WBC Lock Box Account
22
into accounts controlled by the Inyx Operators. These customers are UCB, Alliance
Pharmaceuticals Ltd., Huntly Pharmaceuticals Ltd., Nordic Pharma (“Nordic”), Galen Ltd., Link,
Kogen Ltd., Eumedica Pharmaceuticals AG, Delta, Typharm Ltd., Focus, Meda AB, Dales,
Lidco Ltd., and Dr. Ready Labs.
. Diversion Scheme at Ashton Involving UCB Pharma Limited.
70. UCB is one of Ashton’s largest customers, comprising approximately 40%
of its business. During the time period beginning in December 2006 and ending in May 2007,
the Inyx Operators caused payments from UCB to be diverted from a WBC Lock Box Account
to other bank accounts controlled by the Inyx Operators, including an Inyx EU account at HSBC.
The HSBC account was separate from Ashton’s operational account. The existence of this
account at HSBC was hidden from employees of the Inyx Companies, and the banking
statements associated with the HSBC Account were not kept onsite at the United Kingdom
facilities of Inyx EU or Ashton. The signatories for the HSBC Account are Kachkar,
Goldshmidt, and Joseph Rose, former Vice President of Finance for Inyx EU.
71. On or about December 4, 2006, Handley directed Mark Hardy, UCB UK
Vice President of Corporate Services, to make wire payments into Account Number 32088681
held at HSBC (Branch Sort Code 40-03-28) in the name of Ashton and controlled by the Inyx
Operators. As a further example of this diversion scheme, Handley on or about February 1,
2007, caused UCB to again divert monies to Inyx EU account number 32088681. On March 5,
2007, Handley directly instructed Steve Price of UCB to remit payment into the HSBC account.
All of these payments should have been remitted to a WBC Lock Box Account under the terms
of the Loan Agreements.
72. Handley and Kachkar on other occasions directed or caused others to
direct UCB to make wire payments to the HSBC account controlled by the Inyx Operators rather
23
than make payments into the Lock Box Account. On at least one occasion, Handley agreed to
give UCB a discount on its payment if UCB deposited its payment into the HSBC Account
controlled by the Inyx Operators the same day.
73. The total amount of UCB payments diverted by the Inyx Operators into
the HSBC account was in excess of £4.4 million.
74. As part of this scheme to defraud Westernbank, the Inyx Operators
submitted or caused others to submit to WBC an accounts receivable report dated March 31,
2007 in which it was intentionally misstated that the invoices paid by UCB to the HSBC account
remained unpaid. This was done by the Inyx Operators to conceal from Westernbank the
fraudulent diversion of funds from the Lock Box Account.
75. The Inyx Operators caused these diversions of funds with full knowledge
that the funds belonged to Westernbank, and with fraudulent intent. For example, following
Handley’s instructions to UCB, Joseph Rose, former Vice President of Finance for Inyx EU,
warned Handley that the money being paid by UCB “belongs to Westernbank and unless they
have agreed to the money going to the Inyx bank account in writing you cannot do this.”
Handley dismissed Rose’s warning and falsely represented to him that “there are
negotiations/discussions going on with [Westernbank] that you are not aware of and are highly
sensitive of nature that preclude your point.” Kachkar likewise misrepresented to Rose that the
diversion of funds was appropriate and permissible. In fact, however, the Inyx Operators had no
right to divert, and never told Westernbank they were diverting, payments away from the WBC
Lock Box Account into accounts controlled by the Inyx Operators.
76. Despite the fact that the Inyx Operators knew that all of the funds in the
HSBC account were the property of Westernbank and that they had obtained control over the
24
funds by fraud, the Inyx Operators caused these funds to be disbursed not to WBC, but to Inyx
Companies and Inyx Operators. To date Westernbank has determined that out of the
£4,475,591.00 of payments of UCB that was diverted into the HSBC account, £4,473,399.00 has
been distributed to the Inyx Companies and Kachkar, including at least £1.64 million that was
paid out to Inyx and approximately £500,000.00 that was paid out to Kachkar personally.
. Offset Schemes.
. UCB Deferred Consideration and Working Capital Adjustment

Offset.
77. Starting no later than August 2005, the Inyx Operators devised and
conducted another scheme involving Inyx EU which further defrauded Westernbank. As with
the diversion schemes described above, the purpose and result of this scheme was to avoid
having accounts receivable payments that should have been deposited into the Lock Box
Account owned and controlled by WBC from being deposited into that Account. Here, however,
instead of diverting the customer’s payments into other bank accounts, the Inyx Operators caused
the customers to offset other obligations owed by the Inyx Companies to such customers against
accounts receivables that had been assigned to Westernbank and which should have been paid
into the Lock Box Account. The net effect of this offset would be that the customer’s accounts
receivable owed to an Inyx Company was reduced by a certain amount and an Inyx Company’s
debt or obligation to the customer was reduced by the same amount, all without any money for
the relevant account receivable being paid into or passing through the WBC Lock Box Account.
78. The largest of these offset schemes discovered to date once again involved
Ashton’s biggest customer, UCB. On August 25, 2005, Inyx EU entered into a share purchase
agreement to acquire Ashton (then known as Celltech Manufacturing Services Limited
(“Celltech”)) from UCB (the “Celltech Purchase Agreement”). The agreed consideration for the
25
share purchase was € 27.5 million (approximately £16 million or USD $32 million). A payment
of € 8 million was deferred to be paid in installments to UCB over the course of the twelve
months following the date of purchase. The Celltech Purchase Agreement also provided that
Inyx EU would pay an additional amount in excess of £3.9 million to UCB, depending on the
level of working capital reported by Celltech at the date of completion of the acquisition.
79. Between October 2006 and January 2007, Ashton and UCB offset
approximately £4.5 million of the deferred compensation owed by Inyx EU to UCB under the
Celltech Purchase Agreement by offsetting these amounts against accounts receivable UCB
owed to Ashton. The Inyx Operators, however, had already caused invoices for these accounts
receivable to be submitted by Inyx to WBC for the purpose of obtaining funding under the Loan
Agreements, WBC had already provided additional funding based on the accounts receivable,
and the accounts receivable had already been assigned as security to Westernbank. Accordingly,
the Inyx Companies had no right to offset these accounts receivable against their debts owed to
UCB or any other customer.
80. On March 31, 2007, the Inyx Operators submitted to WBC another
accounts receivable report that misrepresented the accounts receivable involved in the offsetting
described in the prior paragraph as still outstanding, even though the Inyx Operators knew that
the invoices had been effectively paid through the offset. These actions were taken to the Inyx
Operators knowingly, and with fraudulent intent.
81. The Inyx Operators engaged in a further scheme and practice from around
November 2005 to around February 2006 whereby they caused Inyx Companies to offset
approximately £2.6 million in accounts receivable owed by UCB to Ashton against an amount
owed by Inyx EU to UCB as a result of a working capital adjustment under the Celltech
26
Purchase Agreement. Once again, however, the Inyx Operators had already caused invoices for
these accounts receivable to be submitted by Inyx to WBC to obtain funding under the Loan
Agreements, WBC had provided additional funding based on the accounts receivable, and the
accounts receivable had been assigned to Westernbank as security. Accordingly, the Inyx
Companies had no right to offset these accounts receivable against their debts owed to UCB or
any other customer.
. Offsets of Claims Owed by Nordic Pharmaceuticals.
82. A further offset scheme was executed by the Inyx Operators in or about
July 2006. On this occasion, the Inyx Operators caused accounts receivable owed by Nordic to
Ashton totaling approximately £900,000.00 to be offset. Payment of the £900,000.00 Nordic
accounts receivable was required to be made into the WBC Lock Box Account per the Loan
Agreements.
83. The Nordic offset also involved UCB. Nordic had a claim against UCB
for approximately £900,000.00, while Inyx EU still owed UCB an amount over £900,000.00
under the Celltech Purchase Agreement. To effectuate the scheme, the Inyx Operators caused
Ashton to cancel Nordic’s £900,000.00 account receivable invoice in exchange for Nordic
dropping its £900,000.00 claim against UCB and UCB, in turn, canceling £900,000.00 in debt
owed to UCB by Inyx EU. As with the above offset examples, however, the £900,000.00
receivable that the Inyx Operators used for this offset had already been submitted (and assigned
as security) by Inyx to WBC to obtain funding under the Loan Agreements, and WBC had
already provided additional funding based on the accounts receivable.
84. The Inyx Operators subsequently canceled or caused the cancellation of
the £900,000.00 of Nordic accounts receivable from Inyx’s internal accounts receivable ledger,
27
but in order to conceal their fraud from WBC, they did not cancel the £900,000.00 in the reports
submitted to WBC.
. Offsets of Claims Owed by Innovata.
85. A further offset scheme was executed by the Inyx Operators beginning on
or about August 2005 and ending around June 2006. Innovata PLC (“Innovata”) is both a
customer and supplier of Ashton. On several occasions, the Inyx Operators offset accounts
receivable owed by Innovata to Ashton against accounts payable to due to Innovata from Ashton.
At least £213,000.00 of Innovata accounts receivables used in these offsets had previously been
submitted (and assigned as security) by Inyx to WBC to obtain funding under the Loan
Agreements, so Ashton had no right to offset these receivables against amounts it owed Innovata.
. Multiple Sets of Accounts Receivable Records.
86. As a further part of their schemes to defraud Westernbank, the Inyx
Operators engaged in the practice of keeping different sets of books. Specifically, they engaged
in a practice of submitting accounts receivable reports to WBC that materially differed from the
accounts receivable ledgers the Inyx Companies kept internally.
87. Under the Loan Agreements, the Inyx Companies were required to submit
accurate accounts receivable reports to WBC as a precondition to receiving additional financing
under the revolving credit lines. The Inyx Operators were fully aware that monies would only be
available under the lines of credit if supported by, among other things, the collateral shown on
the accounts receivable reports submitted by Inyx. Accordingly, the Inyx Operators “cooked”
the reports submitted by Inyx to WBC so that they would reflect inflated accounts receivable
based upon fraudulent invoices, canceled invoices, duplicate invoices, and invoices that had
already been paid or offset without funds being properly paid into a WBC Lock Box Account.
At the same time, the Inyx Operators either would not have these invoices recorded in the Inyx
28
internal ledgers or would have them removed from the internal ledgers so that the Inyx internal
ledgers, unlike the reports furnished to WBC, would reflect reality.
88. For example, in one instance an entry on the report sent to WBC was
significantly larger in amount than the same entry listed in the Inyx internal ledgers. In that
instance, the Inyx internal accounts receivable ledgers listed an invoice from UCB as
£78,000.00. The same UCB invoice was recorded as £658,000.00 in the accounts receivable
reports that the Inyx Operators caused to be submitted to WBC.
89. The Inyx Companies’ use of different sets of books was in furtherance of
the schemes the Inyx Operators used to defraud Westernbank out of significant amounts of
money. The magnitude of the discrepancies between the two sets of books is shown by
comparing the different sets of books as of March 31, 2007. The accounts receivable reports as
of that date the Inyx Operators submitted or caused to be submitted to WBC reported
£51,770,982.00 as the outstanding accounts receivable for the Ashton and Inyx Pharma entities,
whereas the Inyx internal accounts receivable ledgers recorded only £8,007,709.00 as the actual
amount owed to Ashton and Pharma. The difference in these two amounts is due to the Inyx
Operators’ fraud as described above (but the difference does not reflect the full magnitude or
amount of the fraud).
. The Collapse of the Inyx Operators’ Fraudulent Schemes.
90. Over time, it became increasingly difficult for the Inyx Operators to
continue their fraudulent scheme as more and more questions arose about the quality and
collectability of the Inyx Companies’ accounts receivable reported to WBC as collateral for
WBC’s funding – accounts receivable that the Inyx Operators knew were not collectable either
because they were fabricated or had already been paid by funds diverted from the WBC Lock
Box Accounts into accounts controlled by the Inyx Operators. The Inyx Operators responded to
29
these questions by making numerous additional false or misleading representations to
Westernbank or its representatives.
91. On or about August 1, 2006, a conference call was conducted among
Westernbank employees and Handley and Hunter. During this call, Handley and/or Hunter
falsely represented to Westernbank that most of the Inyx past due accounts receivable discussed
on the call would be collected over the coming months even though they knew that most of these
accounts receivable were fraudulent. This conference call took place over international wires.
92. On or about August 11, 2006, Kachkar, Green, Goldshmidt and other Inyx
Companies employees traveled to Puerto Rico to meet in person with Westernbank employees.
Among the topics discussed were Inyx’s aging accounts receivable. Kachkar, Green and/or
Goldshmidt told the Westernbank employees that they should direct their questions to Handley
and Hunter because they were the ones knowledgeable about the accounts receivable. Kachkar,
Green and Goldshmidt, however, well knew – but concealed from Westernbank – that the reason
payment for some of the accounts receivable had not been made into the WBC Lock Box
Account was because either the accounts receivable were fraudulent or payment for them had
already been diverted to accounts controlled by the Inyx Operators.
93. Starting in September 2006 and continuing through at least May 2007, the
Inyx Operators repeatedly, misled Westernbank by advising it that the Inyx Companies and/or
the Inyx Operators were finalizing arrangements with other sources of funding either to buy out
or significantly pay down the Inyx Companies’ debt to Westernbank. The Inyx Operators falsely
assured Westernbank on numerous occasions that financing agreements had been reached and
were in the final stages of negotiation. The Inyx Operators used these false representations to
convince Westernbank (a) not to declare the USA and EU Borrowers in default under the Loan
30
Agreements, (b) to refrain from collecting or foreclosing on the collateral securing its loans, and
(c) to provide Inyx with additional funding so that the Inyx Companies could continue to operate
while the new funding was being arranged. Examples of these false representations, all of which
were transmitted over interstate or foreign wires, include:
(a) On or about September 7, 2006, Green advised Westernbank that Inyx was
negotiating with Richard Louis Dreyfus to obtain $25 million in working
capital, and asked Westernbank to advance Inyx funds on future
collections.
(b) On or about October 3, 2006, Green informed Westernbank that Credit

Suisse Group would provide Inyx with refinancing.
(c) On or about October 23, 2006, Green told Westernbank that they were still
working on the refinancing with major banks, that Wachovia Securities
had emerged as a possible refinancing source, and that Inyx would shortly
decide which bank they would use for their refinancing. During this time
period, Inyx continued to request and obtain advances on its future
collections.
(d) On or about November 1, 2006, Green represented to Westernbank that

Goldman Sachs, Credit Suisse, HSBC and Wachovia Securities were in
the final stages of conducting due diligence to provide refinancing for
Inyx, and that JP Morgan had emerged as another possible refinancing
source.
(e) On or about January 9, 2007, Green advised Westernbank that Inyx was
meeting with Goldman Sachs in the near future to make its final
presentation to obtain refinancing from Goldman Sachs. At the same time
Green advised Westernbank that Kachkar was in mature discussions with
the Louis Dreyfus Group concerning additional funding. Inyx continued
to seek and obtain advances from Westernbank to continue its operations.
(f) On or about January 22, 2007, Green advised Westernbank that Goldman
Sachs was requiring the Inyx Group to engage McKinsey & Co. to
conduct an independent valuation of the Inyx businesses. Green further
advised that the McKinsey & Co. report would take three weeks to
complete and that the new financing would be in place by March 2007.
During this time Inyx continued to seek and obtain advances from
Westernbank to continue its operations.
(g) On or about February 13, 2007, Green informed Westernbank that Pareto
Securities was now the lead bank to provide Inyx with refinancing, and
that Inyx would soon send Westernbank a commitment letter for the
31
refinancing. During this time Inyx continued to seek and obtain advances
from Westernbank to continue its operations.
(h) On or about March 6, 2007, Green forwarded an email from a London

attorney to Kachkar confirming that Pareto Securities had committed to
arrange a personal $300 million short-term bridge financing for Kachkar
that could be used to pay off the Westernbank loans. The attorney also
confirmed that “serious” discussions were ongoing with Al-Saadi Qadhafi
of Libya concerning a partnership arrangement in which Mr. Qadhafi
would provide a multi-hundred-million dollar investment which would be
used to pay off the Westernbank loans.
(i) On or about March 15, 2007, Green forwarded an email Kachkar received
from the same London attorney that was addressed to Westernbank. The
email stated that Kachkar, through another company he owns (Karver
Capital Holdings, Ltd.), was finalizing the business partnership with Al-
Saadi Qadhafi. The email further stated that a large portion of the funds
from the partnership would be used to pay off the Westernbank loans
provided that Westernbank “continued support to enable the Company to
run its businesses until the Qadhafi Investment is executed.”
(j) On or about March 30, 2007, Green advised Westernbank that the
partnership agreement with Al-Saadi Qadhafi’s company would be
executed within days. During this time Inyx continued to seek and obtain
advances from Westernbank to continue its operations.
(k) On or about April 8, 2007, and on or about April 18, 2007, one of the Inyx
Operators caused communications to be sent to Westernbank indicating
that Al-Saadi Qadhafi would be providing Inyx with funds to pay off the
Westernbank debt. During this time Inyx continued to seek and obtain
advances from Westernbank to continue its operations.
(l) On or about May 2, 2007, Green represented to Westernbank that the

paperwork needed to transfer money from Sahara Bank pursuant to the
agreement with Al-Saadi Qadhafi was being finalized. Green represented
that after the completion of the paperwork that it would take “several
weeks” for the payment to be transferred because Sahara Bank is the
central bank for Libya.
(m) On or about May 22, 2007, Green told Westernbank that new financing
would now be coming from the Republic of Kazakhstan.
94. In May 2007, Westernbank learned of a collateral deficiency under the
Loan Agreements in excess of $80 million because of uncollectible accounts receivable. Various
Inyx officers, including Kachkar, Green and Goldshmidt, thereafter gave false assurances to
32
Westernbank in June 2006 that the collateral deficiency was substantially less than this sum, the
accounts receivable identified as uncollectible were in fact collectible, and/or that the collateral
deficiency would be covered by other assets.
95. As of June 28, 2007, Westernbank had made loans to the USA and EU
Borrowers in the amount of $142,778,299.77 under the Loan Agreements. As of that date,
numerous Events of Default under the Loan Agreements had occurred.
96. On June 28, 2007, administrators were appointed for Inyx Pharma and the
EU Borrowers.
97. On June 29, 2007, Westernbank sent a demand letter to the USA
Borrowers (attached Exhibit 17). In that demand letter, Westernbank informed the USA
Borrowers that (i) the amount of the outstanding loans exceeded the amounts available under the
lending formulas and (ii) Westernbank was demanding, as entitled under the Loan Agreements
and the Cross-Default Agreement, for the immediate payment of such excess amounts, totaling
$87,282,422. The demand letter also informed the USA Borrowers that all other “Obligations”
as defined under the Loan Agreements had become due and payable.
98. Also on June 29, 2007, Westernbank sent a separate demand letter to Inyx
Pharma and the EU Borrowers making the same demand as in the demand letter sent to the USA
Borrowers but referring to the Obligations under the EU Loan Agreement that had become due
and payable as a result of Event of Defaults under the EU Loan Agreement (attached Exhibit 18).
99. On July 2, 2007, Inyx USA, as well as another Inyx subsidiary named
Exearis, Inc., filed voluntary petitions for relief under chapter 11 of title 11 of the United States
Code in the United States Bankruptcy Court for the District of Delaware.
33
100. On or about July 3, 2007, Westernbank sent to Inyx, Inyx Pharma, Inyx
EU and Ashton a “Notice of Default and Demand” (attached Exhibit 19). The Notice of Default
and Demand stated that numerous defaults had occurred under the Loan Agreements. The
Events of Default accurately stated in the Notice included:
(a) Failure to furnish financial statements and other financial information as

required by the Loan Agreements.
(b) Failure to maintain Working Capital, Adjusted Net Worth, Tangible Net
Worth and Excess Cash flow as required by the Loan Agreements.
(c) Breach of representations and covenants with respect to Accounts,

including, without limitation, pre-billing of Accounts, billing of Accounts
for work not completed, billings of amounts to customers that were not yet
earned or which the customer had not agreed to pay, and submission of
statements of Accounts that were false and subsequently modified.
(d) Failure to deposit or remit all payments on Receivables, including without

limitation collections of Accounts, to the Lock Box Accounts.
(e) Opening deposit accounts other than those permitted under the Loan
Agreements.
(f) Breach of trust in failing to deposit in the Lock Box Accounts or remit to
Westernbank proceeds of Accounts.
(g) Failure to report credits given on Accounts.
(h) Repayments of loans, advances or other indebtedness of Borrowers to

Kachkar in violation of the Loan Agreements.
(i) A material adverse change in the business, assets or properties of

Borrowers as revealed by the draft Balance Sheets and Income Statements
as of December 31, 2006 and March 31, 2007, respectively, furnished to
Westernbank by or on behalf of Borrowers in June, 2007.
(j) Inability of Borrowers to pay debts as they fall due.
(k) Failure of Borrowers to pay outstanding loans and components of loans in

excess of the amounts available under the Loan Agreements.
101. Each of the Events of Default listed in Westernbank’s July 3, 2007 Notice
of Default and Demand occurred prior to July 3, 2007 and are continuing.
34
102. The USA and EU Borrowers had, as of July 3, 2007, jointly and severally,
incurred obligations to Westernbank amounting to at least $142,778,299.77. Although demand
has properly been made for this amount, as of the date of this Complaint, the amount remains
unpaid.
103. On or about July 3, 2007, Westernbank also issued letters to the Inyx
Operators demanding payment under the Fraud Guarantees (attached Exhibit 20). By these
letters, Westernbank demanded payment from the Inyx Operators of at least $80 million. The
Inyx Operators, however, failed to comply with these letters or otherwise satisfy any of their
respective obligations under the Fraud Guarantees.
104. On or about July 3, 2007 and on or about July 10, 2007, Westernbank
issued letters to Kachkar and Benkovitch demanding payment under the Personal Guarantees and
the furnishing of the Mining Collateral under the Collateral Deficiency Letter (attached Exhibits
21 and 22). Westernbank demanded from Kachkar and Benkovitch (a) payment in the amount of
$30.1 million under the First Personal Guarantee, (b) payment in the amount of and
$70,378,299.77 under the Second Personal Guarantee, (c) the furnishing of the Mining Collateral
sufficient to cover the collateral deficiency under the Loan Agreements, and (d) compliance with
and performance of their covenants under the Collateral Deficiency Letter. Kachkar and
Benkovitch, however, failed to comply with these demand letters or otherwise satisfy any of their
respective obligations under the Personal Guarantees and the Collateral Deficiency Letter.
. Recent Revelations About How the Inyx Operators Ran Inyx and Its Subsidiaries.
105. Following recent events, including Inyx USA filing for bankruptcy
protection in the United States, Inyx Pharma, Inyx EU and Ashton being placed into
administration in the United Kingdom, and various court proceedings taking place as to the Inyx
35
Companies, additional information has surfaced about the manner in which, and means by
which, the Inyx Operators ran Inyx and its subsidiaries.
106. Westernbank has learned, for example, that the Inyx Operators used
Westernbank property for their own benefit. One instance is reflected in the bank records for the
HSBC account into which the Inyx Operators diverted customer payments that were
Westernbank property and were required to be paid into the WBC Lock Box Account (as
described more fully above). Those records reveal that Kachkar personally received
£493,496.00 of these diverted funds directly from the HSBC Account. Recently discovered
records also show that Inyx “repaid” Kachkar for a significant “loan” notwithstanding the facts
that (a) no formal documentation exists for the loan and (b) the Loan Agreements prohibited
Inyx from repaying alleged debts owed to Kachkar.
107. Westernbank has further learned that the Inyx Operators used the funding
obtained from WBC as they saw fit, rather than as needed by the Inyx subsidiaries to conduct
their operations or as limited by the terms of the Loan Agreements. Now that several of the Inyx
operating companies are in bankruptcy or administration, it has become clear that the funding
was not allocated to the operating subsidiaries in proportion to their accounts receivable used as
collateral for the funding. To the contrary, despite the fact that Inyx is supposedly a mere
holding company that does not have ongoing manufacturing operations, the Inyx Operators
routinely retained large sums of money in Inyx that they had collected from the WBC revolving
lines of credit and from payments on subsidiaries’ accounts receivable which the Inyx Operators
had fraudulently diverted away from the WBC Lock Box Accounts.
108. Westernbank has further learned that the Inyx Operators ran the Inyx
Companies in complete disregard for separate corporate forms. The Inyx Operators routinely
36
participated in the operating, financial, and onsite management decisions of Inyx’s operating
subsidiaries without regard to what positions they held in those subsidiaries (or whether they
held any formal position at all with the companies). For example, Handley, who held no position
in several of the Inyx Companies, required the managers of all the Inyx Companies to submit to
him daily cash flow reports for the companies. Moreover, while neither Handley nor Hunter had
a formal position within Ashton, both would routinely direct the operations and finances of
Ashton. As part of the fraudulent schemes described above, Handley would also issue
instructions to Ashton customers informing them to which bank accounts they should to make
payments, and Hunter signed development invoices on behalf of Ashton.
109. Westernbank has further learned that the Inyx Companies regularly
commingled their documents. In affidavits submitted in proceedings in Canada on or about
August 9, 2007, the Inyx Companies claimed that there are documents at the Inyx Canada office
in Toronto, Canada belonging to a number of different Inyx Companies, including Inyx, Inyx
USA, Inyx Pharma, Karver Capital Canada Inc. and Global Consulting Inc.
110. Perhaps most revealing, Westernbank has learned that the Inyx Operators’
pattern of defrauding third parties that have extended financing to Inyx predates Westernbank’s
relationship with Inyx. Just last week, Westernbank obtained a September 30, 2004
memorandum from two Inyx Pharma employees to their bosses, Inyx Operators Handley and
Hunter, in which the employees took issue with Inyx keeping for itself customer payments that
should have been paid into a lock box account for Laurus Master Fund (Inyx’s pre-Westernbank
source of financing). In a description eerily similar to the diversions detailed above, the
employees stated: “The agreement with Laurus master Fund was that customer cash receipts
were to be swept into the Laurus ‘lockbox’ bank account. On 14th September [2004] we were
37
instructed to sweep all customer cash to Inyx Inc as they were to take over control of the facility,
this was done for about a week and then on Monday 27th September 2004 we were instructed to
use customer cash to meet our payment obligations in the UK. … It would be prudent that all
future receipts of Laurus customer cash should be sent directly to the Laurus lock box unless a
waiver has been put into place or that we have received a wire confirmation it has been remitted
back to Laurus.”
111. Westernbank’s investigation continues, not only into the Inyx Operators’
management and operation of the Inyx Companies, but also their management and operation of
other companies, including three Miza Pharmaceuticals, Inc. subsidiaries, one of which went into
bankruptcy in the United States, another into administration in the United Kingdom, and a third
into liquidation in Ireland.
FIRST CAUSE OF ACTION
(RICO – Violation of 18 U.S.C. §1962(c), Against Kachkar,

Handley, Hunter, Green and Goldshmidt)
112. Westernbank repeats and realleges each of the allegations contained in
paragraphs 1 though 111 inclusive, as if fully set forth herein.
113. At all times relevant to this Complaint, Inyx was an “enterprise” within
the meaning of 18 U.S.C. §1961(4), as it was a Nevada, and then Delaware, corporation with its
headquarters in New York City, New York. Through its wholly owned subsidiaries, Inyx
manufactured pharmaceutical products for and sold pharmaceutical products to customers
throughout and outside the United States. As a result of these and other business activities of
Inyx, at all times relevant to this Complaint, Inyx engaged in interstate and foreign commerce
and its activities affected interstate and foreign commerce.
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114. At all times relevant to this Complaint, the Inyx Operators were “persons”
within the meaning of 18 U.S.C. §1961(3) as they were individuals capable of holding a legal or
beneficial interest in property. As alleged in greater detail in the preceding paragraphs, each
Inyx Operator was (a) employed by and associated with Inyx and (b) conducted and participated
in the conduct of Inyx’s affairs. For example, and without limiting the other allegations in this
Complaint of their employment by, association with, and participation in the conduct of Inyx:
(a) At all times relevant to this Complaint, Kachkar was the Chairman, Chief
Executive Officer and Director of Inyx, and also held an ownership interest in Inyx.
Through his formal positions with Inyx and otherwise, Kachkar was involved in
managing Inyx’s affairs, including being directly involved in Inyx’s acquisitions, the
financing obtained from WBC for Inyx and/or its subsidiaries, and the allocation and use
both of the WBC financing and of the payments Inyx and its subsidiaries received from
their customers.
(b) At all times relevant to this Complaint, Handley was the President and
Director of Inyx, and also held an ownership interest in Inyx. Through his formal
positions with Inyx and otherwise, Handley was involved in managing Inyx’s affairs,
including being directly involved in Inyx’s acquisitions, the financing obtained from
WBC for Inyx and/or its subsidiaries, and the allocation and use both of the WBC
financing and of the payments Inyx and its subsidiaries received from their customers.
(c) At all times relevant to this Complaint, Hunter was an Executive Vice
President and Director of Inyx, and also held an ownership interest in Inyx. Through his
formal positions with Inyx and otherwise, Hunter was involved in managing Inyx’s
affairs, including being directly involved in Inyx’s acquisitions, the financing obtained
39
from WBC for Inyx and/or its subsidiaries, and the allocation and use both of the WBC
(d) At all times relevant to this Complaint, Green was an Executive Vice
President of Inyx, is currently a Director of Inyx, and also held an ownership interest in
Inyx. Through his formal positions with Inyx and otherwise, Green was involved in
managing Inyx’s affairs, including being directly involved in Inyx’s acquisitions, the
financing obtained from WBC for Inyx and/or its subsidiaries, and the allocation and use
both of the WBC financing and of the payments Inyx and its subsidiaries received from
their customers.
(e) At all times relevant to this Complaint, Goldshmidt was a Vice President
and Treasurer of Inyx, and also held an ownership interest in Inyx. At various times
relevant to this Complaint, Goldshmidt was also the Chief Financial Officer and a
Director of Inyx. Through her formal positions and otherwise, Goldshmidt was involved
in managing Inyx’s affairs, including being directly involved in the financing obtained
from WBC for Inyx and/or its subsidiaries, and the allocation and use both of the WBC
115. As alleged in greater detail in the preceding paragraphs, each Inyx
Operator conducted and participated in the conduct of Inyx’s affairs through racketeering
activities, including wire fraud in violation of 18 U.S.C. §1343, financial institution fraud in
violation of 18 U.S.C. §1344, and money laundering in violation of 18 U.S.C. § 1957. For
example, and without limiting the other allegations in this Complaint of the Inyx Operators’
racketeering activities:
40
(a) The Inyx Operators conceived of, effectuated and directed others to
effectuate the transactions whereby Inyx obtained additional funding from WBC, a
division of Westernbank, a federally insured financial institution, by submitting false and
fraudulent invoices, assignment sheets, and reports to WBC to justify and secure the
additional funding. These transactions were furthered by the use of the interstate and/or
foreign wires, as documents relating to the transactions were transmitted to or exchanged
between the various participants through the interstate and/or foreign wires.
(b) The Inyx Operators conceived of, effectuated and directed others to
effectuate the transactions whereby customers making payments for good or services
obtained from an Inyx subsidiary were instructed not to make the payments to a Lock
Box Account controlled by WBC, a division of Westernbank, a federally insured
financial institution, as required by the terms of the Loan Agreements and as would place
those payments under the custody and control of WBC, but instead to other accounts
controlled by the Inyx Operators and over which WBC did not have custody or control.
These transactions were furthered by the use of the interstate and/or foreign wires, as
documents relating to the transactions were transmitted through the interstate and/or
foreign wires and documents concealing the transactions from Westernbank were
transmitted through the interstate and/or foreign wires.
(c) The Inyx Operators made and caused others to make false representations
to WBC in order to induce WBC, a division of Westernbank, a federally insured financial
institution, not to declare the USA and EU Borrowers in default under the Loan
Agreements, to refrain from collecting or foreclosing on the collateral securing its loans,
and to provide Inyx with additional funding so that the Inyx Companies could continue to
41
operate while the Inyx Operators allegedly pursued alternative sources of funding to buy
out or pay down the debt the USA and EU Borrowers owed Westernbank. Many of these
misrepresentations were communicated to WBC through the interstate and/or foreign
wires.
(d) The Inyx Operators conceived of, effectuated and directed others to
effectuate monetary transactions with values greater than $10,000 involving property
derived from their wire fraud and financial institution fraud.
116. As alleged in greater detail in the preceding paragraphs, the foregoing
racketeering activities by the Inyx Operators constitutes a pattern of racketeering activity within
the meaning of 18 U.S.C. § 1961(5). For example, and without limiting the other allegations in
this Complaint of the Inyx Operators’ pattern of racketeering activities:
(a) The wire and financial institution fraud, and the money laundering, of the
Inyx Operators alleged in the preceding paragraphs involved multiple acts of racketeering
activity within the past ten years.
(b) The wire and financial institution fraud, and the money laundering, of the
Inyx Operators alleged in the preceding paragraphs began no later than September 2004
and continued through at least July 2007.
(c) These acts of racketeering were the regular way of operating Inyx by the
Inyx Operators. On numerous and frequent occasions, the Inyx Operators caused false
and fraudulent invoices to be submitted to WBC so that Inyx could improperly obtain
additional funding from WBC. On numerous and frequent occasions, the Inyx Operators
directed or caused others to direct customers to make payments not to a Lock Box
Account controlled by WBC, but instead to other accounts controlled by the Inyx
42
Operators. On numerous occasions, the Inyx Operators engaged in or caused others to
engage in monetary transactions with values greater than $10,000 involving property
derived from their wire fraud and financial institution fraud.
(d) The very nature of these acts of racketeering implied a threat of continued
criminal activity. The Inyx Operators were regularly engaged in making or causing
others to make false statements about Inyx’s operations, accounts receivable, and
financial condition. The Inyx Operators were regularly engaged in diverting funds from
the WBC Lock Box Accounts to other accounts under their control. The Inyx Operators
were regularly engaged in monetary transactions involving property derived from their
fraudulent activities. These false statements, fraudulent transactions and money
laundering activities would have continued had it not been for their discovery by
someone outside the Inyx Operators’ conspiracy in 2007.
(e) There were a number of participants in the Inyx Operators’ fraudulent
schemes, including not only the Inyx Operators, but also (without limitation) certain other
Inyx employees with knowledge of their schemes and third parties associated with the
Inyx Operators who also had knowledge of and participated in their schemes.
117. In summary, the Inyx Operators conducted and participated in the conduct
of Inyx’s affairs through a pattern of racketeering activity, in violation of 18 U.S.C. § 1962(c).
118. As alleged in greater detail in the preceding paragraphs, Westernbank was
directly injured in its business and property by reason of the violation of 18 U.S.C. § 1962 set
forth above, and therefore is entitled under 18 U.S.C. § 1964(c) to damages in an amount to be
determined, but that exceed $142 million, trebled, plus interest and attorneys’ fees.
43
SECOND CAUSE OF ACTION
(RICO Conspiracy – Violation of 18 U.S.C. §1962(d), Against

Kachkar, Handley, Hunter, Green and Goldshmidt)
paragraphs 1 through 118 inclusive, as if fully set forth herein.
120. At all times relevant to this Complaint, the Inyx Operators were “persons”
within the meaning of 18 U.S.C. § 1961(3) as they were individuals or entities capable of
holding a legal or beneficial interest in property.
121. As alleged in greater detail in the preceding paragraphs, the Inyx
Operators conspired with each other and with others, known and unknown, to violate 18 U.S.C.
§1962(c), all in violation of 18 U.S.C. § 1962(d).
122. Through their participation in and facilitation of the racketeering activities
alleged in detail in the preceding paragraphs, the Inyx Operators and their conspirators intended
to further, agreed to further, and in fact did further the fraudulent schemes of the Inyx Operators
and were aware of the existence, if not the very identity, of the other participants in the
fraudulent schemes and conspiracy.
directly injured in its business and property by reason of the violations of 18 U.S.C. § 1962 set
forth above, and therefore is entitled under 18 U.S.C. § 1964(c) to damages in an amount to be
determined, but that exceed $142 million, trebled, plus interest and attorneys’ fees.
44
THIRD CAUSE OF ACTION
(Damages under Article 1802, Against Kachkar,

Handley, Hunter, Green, and Goldshmidt)
125. Puerto Rico Civil Code Article 1802, 31 L.P.R.A. §5141, provides that
any “person who by act or omission causes damages to another through fault or negligence shall
be obliged to repair the damage so done.”
Operators engaged in intentional or negligent acts or omissions that caused damages to
Westernbank and are therefore obliged by law to repair that damage. For example, and without
limiting the other allegations in this Complaint of the acts in which the Inyx Operators engaged
that caused damages to Westernbank through their fault or negligence:
(a) The Inyx Operators conceived of, effectuated and directed others to
effectuate the transactions whereby Inyx obtained additional funding from Westernbank
by submitting false and fraudulent invoices, assignment sheets, and reports to WBC to
justify and secure the additional funding.
(b) The Inyx Operators conceived of, effectuated and directed others to
effectuate the transactions whereby customers making payments for good or services
obtained from an Inyx subsidiary were instructed not to make the payments to a Lock
Box Account controlled by WBC, as required by the terms of the Loan Agreements and
as would place those payments under the custody and control of WBC, but instead to
other accounts controlled by the Inyx Operators and over which WBC did not have
custody or control.
45
(c) The Inyx Operators made and caused others to make false representations
to WBC in order to induce WBC not to declare the USA and EU Borrowers in default
under the Loan Agreements, to refrain from collecting or foreclosing on the collateral
securing its loans, and to provide Inyx with additional funding so that the Inyx
Companies could continue to operate while the Inyx Operators allegedly pursued
alternative sources of funding to buy out or pay down the debt the USA and EU
Borrowers owed Westernbank.
127. The Inyx Operators, acting individually and in concert, engaged in
purposeful and conscious conduct, intending to evade compliance with their duties and
obligations and to defraud Westernbank.
damaged by the foregoing actions and omissions, and therefore is entitled under Article 1802 to
damages in an amount to be determined, but that exceed $142 million, plus interest.
FOURTH CAUSE OF ACTION
(Breach of Contract and Collection of Monies, Against Inyx)
130. Pursuant to Puerto Rico Civil Code Article 1044, 31 L.P.R.A. § 2994,
obligations arising from a contract have legal force between the contracting parties and must be
fulfilled in accordance with its stipulations.
131. Pursuant to Puerto Rico Civil Code Article 1077, 31 L.P.R.A. § 3052,
when one of the parties to a contract fails to comply with its obligations under the same, the
person prejudiced may demand the fulfillment of the obligation and payment of interest.
46
132. As alleged in greater detail in the preceding paragraphs, Events of Default
under the Loan Agreements have occurred and are continuing.
133. At various times prior to the commencement of this action, Westernbank
duly served upon the USA and EU Borrowers, including Inyx, notices of said Events of Default
and demand for payments of the obligations due and owing under the Loan Agreements.
134. To date, the USA and EU Borrowers have failed to cure the Events of
Default and have failed to pay to Westernbank the amounts that are now due and payable under
the Loan Agreements. As a result of these failures and the Cross-Default Agreement, Inyx is in
breach of the Loan Agreements, and all obligations under the Agreements are due and payable.
All conditions precedent to the enforcement of the Loan Agreements have been satisfied.
135. Westernbank requests judgment against Inyx for the amount due and
payable under each of the Loan Agreements, which amount is to be determined, but that exceed
$142 million, plus interest, attorneys’ fees and other costs recoverable under the Agreements.
FIFTH CAUSE OF ACTION
(Breach and Enforcement of EU Guarantee, Against Inyx)
137. All Loan Obligations by the EU Borrowers under the EU Loan Agreement
are due and payable to Westernbank. The EU Borrowers, however, have failed to pay to
Westernbank the amounts due under the EU Loan Agreement.
138. Pursuant to the EU Guarantee, Inyx guaranteed the payment and
performance of the EU Borrowers under the EU Loan Agreement.
47
139. Westernbank has duly demanded that Inyx, in its capacity as guarantor of
the obligations under the EU Loan Agreement, make payment to Westernbank in the full amount
of the obligations of the EU Borrowers under the EU Loan Agreement. Inyx, however, has
failed to honor its obligation as guarantor to make payment to Westernbank. As a result, Inyx
has breached its obligations under the EU Guarantee.
140. Westernbank is entitled to enforcement of the EU Guarantee. All
conditions precedent to the enforcement of the EU Guarantee have been satisfied. Accordingly,
Westernbank requests judgment to be entered against Inyx for the obligations due to
Westernbank under the EU Loan Agreement in an amount to be determined, plus interest,
attorneys’ fees and other costs recoverable under the EU Guarantee.
SIXTH CAUSE OF ACTION
(Breach and Foreclosure of Collateral Under All Security Agreements

Relating to the USA and EU Loan Agreements, Against Inyx)
142. In connection with the Loan Agreements, security interests were granted
to Westernbank by the Inyx Companies.
143. Under the Cross Default Agreement, all of the collateral under the EU
Loan Agreement serves as collateral under the USA Loan Agreement and all of the collateral
under the USA Loan Agreement serves as collateral under the EU Loan Agreement.
144. All of the following agreements, among others, provided security interests
in collateral to Westernbank in connection with the Loan Agreements: (a) the USA Loan
Agreement; (b) the EU Loan Agreement; (c) the USA Guarantee; (d) the Guarantee from Inyx
Canada and Inyx Pharma, dated March 31, 2005; (e) the Pledge and Security Agreement, dated
48
March 31, 2005, (f) the Patent Security Agreement, dated March 31, 2005; (g) the Trademark
Collateral Assignment, dated March 31, 2005; (h) the Collateral Assignment of Claims, dated
August 31, 2005; (i) the Collateral Assignment of Licenses dated August 31, 2005; (j) the Cross
Default Agreement; (k) the Guarantee from Inyx Canada dated August 31, 2005; and (l) the EU
Guarantee. All of these agreements are collectively referred to hereinafter as “the Security
Agreements.”
145. Under the Security Agreements, if an Event of Default occurs and is
continuing under the USA or EU Loan Agreement, Westernbank is entitled to collect, foreclose,
receive, and realize upon any and all collateral provided under the Security Agreements.
146. Because an Event of Default has occurred and is continuing under both of
the USA and EU Loan Agreements, Westernbank is entitled to collect and foreclose on all of the
collateral in which it was granted security interests under the Security Agreements. All
conditions precedent to the enforcement of the Security Agreements have been satisfied.
147. Westernbank requests judgment to be entered ordering foreclosure of all
collateral in the possession, custody or control of Inyx to which it is entitled under the Security
Agreements (the “Inyx Collateral”) and that this Court take all actions deemed pertinent so that
Westernbank can take control of the Inyx Collateral, including giving Westernbank immediate
access to the Inyx Collateral.
SEVENTH CAUSE OF ACTION
(Breach and Enforcement of First Personal Guarantee,

Against Kachkar and Benkovitch)
49
149. Kachkar and Benkovitch have failed and refused to satisfy their
obligations under the First Personal Guarantee and pay Westernbank the amount owed under the
First Personal Guarantee. As a result, Kachkar and Benkovitch have materially breached, and
are in material breach of, the First Personal Guarantee. All conditions precedent to the
enforcement of the First Personal Guarantee have been satisfied.
150. As a direct and proximate result of their defaults under the First Personal
Guarantee, Kachkar and Benkovitch should be jointly and severally required, and ordered, to pay
Westernbank $30.1 million, plus interest, attorneys’ fees and other costs recoverable under the
First Personal Guarantee.
EIGHTH CAUSE OF ACTION
(Breach and Enforcement of Second Personal Guarantee and Collateral

Deficiency Letter, Against Kachkar and Benkovitch)
obligations under the Second Personal Guarantee and pay Westernbank the amount owed under
the Second Personal Guarantee. As a result, Kachkar and Benkovitch have materially breached,
and are in material breach of, the Second Personal Guarantee. All conditions precedent to the
enforcement of the Second Personal Guarantee have been satisfied.
obligations under the Collateral Deficiency Letter and provide to Westernbank the Mining
Collateral required by that Letter. As a result, Kachkar and Benkovitch have materially
breached, and are in material breach of, the Collateral Deficiency Letter. All conditions
precedent to the enforcement of the Collateral Deficiency Letter have been satisfied.
50
154. As a direct and proximate result of their defaults under the Second
Personal Guarantee and Collateral Deficiency Letter, Kachkar and Benkovitch should be jointly
and severally required, and ordered, to pay Westernbank the total amount due under the Second
Personal Guarantee, which amount is to be determined, but that exceeds $70 million, plus
interest, attorneys’ fees and other costs recoverable under the Second Personal Guarantee, and to
turn over and transfer to Westernbank the Mining Collateral.
NINTH CAUSE OF ACTION
(Breach and Enforcement of Fraud Guarantees, Against Kachkar,

Handley, Hunter, Green and Goldshmidt)
156. As alleged in greater detail in the preceding paragraphs, Westernbank has
been defrauded by the Inyx Companies and certain of their officers and employees in connection
with Westernbank lending monies under the Loan Agreements.
157. Under the Fraud Guarantees executed by the Inyx Operators, each is
jointly and severally liable to Westernbank for any damage or loss which Westernbank sustained
as a result of the fraud, deceit and criminal acts alleged in this Complaint.
158. Westernbank has sustained damage and loss as a result of such fraud,
deceit and criminal acts in an amount to be determined, but that exceeds $142 million.
159. Westernbank has duly given notice and demand to the Inyx Operators and
requested payment under the Fraud Guarantees. The Inyx Operators have failed to honor their
obligations under the Fraud Guarantees. All conditions precedent to the enforcement of the
Fraud Guarantees have been satisfied.
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160. Westernbank respectfully requests that the Court enter judgment against
the Inyx Operators, jointly and severally, for all damages and loss that Westernbank has suffered
as a result of the fraud, deceit and criminal acts perpetrated against it as alleged in this
Complaint, in an amount to be determined, but that exceeds $142 million, plus interest,
attorneys’ fees and other costs recoverable under the Fraud Guarantees.
TENTH CAUSE OF ACTION
(Damages under Article 1055 and 1060, Against

Inyx, Kachkar, Handley, Hunter, Green, and Goldshmidt)
Operators engaged and caused Inyx and its subsidiaries to engage in fraudulent acts in the
performance of the various Loan Agreements, Security Agreements, and Guarantees alleged in
this Complaint. Inyx and the Inyx Operators, acting individually and in concert, engaged in
purposeful and conscious conduct, intending to evade compliance with their duties and
obligations and to defraud Westernbank.
163. The fraudulent acts of Inyx and the Inyx Operators increased the damages
and loss caused to Westernbank relating to the various Loan Agreements, Security Agreements,
and Guarantees alleged in this Complaint.
damaged by the fraudulent conduct of Inyx and the Inyx Operators, and therefore is entitled
under Puerto Rico Civil Code Articles 1055 and 1060, 31 L.P.R.A. §§ 3019 & 3024, to damages
in an amount to be determined, but that exceed $142 million, plus interest, and well as to a
52
recovery for all other damages and losses originating from the nonfulfillment of the obligations
in the various Loan and Security Agreements and Guarantees alleged in this Complaint.
WHEREFORE, Westernbank demands judgment against Defendants as follows:
(a) on the First and Second Causes of Action, awarding Westernbank

damages against the Defendants named in those Causes of Action in an
amount to be determined at trial, but not less than $142 million, trebled,
plus interest;
(b) on the Third and Ninth Causes of Action, awarding Westernbank damages
against the Defendants named in those Causes of Action in an amount to
be determined at trial, but not less than $142 million, plus interest;
(c) on the Fourth and Fifth Causes of Action, awarding Westernbank damages
against Inyx in an amount to be determined at trial, but not less than $142
million, plus interest;
(d) on the Sixth Cause of Action, ordering foreclosure of all the Inyx
Collateral and transfer of the Inyx Collateral to Westernbank;
(e) on the Seventh Cause of Action, awarding Westernbank $30 million, plus
interest, against Kachkar and Benkovitch;
(f) on the Eighth Cause of Action, awarding Westernbank an amount to be

determined at trial, but not less than $70 million, plus interest, against
Kachkar and Benkovitch, and ordering Kachkar and Benkovitch to
transfer to Westernbank the Mining Collateral;
(g) on the Tenth Cause of Action, awarding Westernbank damages against the
Defendants named in the Tenth Cause of Action an amount to be
determined at trial, but not less than $142 million, plus interest;
(h) awarding Westernbank preliminary and, if appropriate, permanent

injunctive relief against the Defendants;
(i) awarding Westernbank the costs and disbursements incurred in

prosecuting this action, including for the fees and expenses of its attorneys
and experts; and
(j) granting such other and further legal and equitable relief as the Court may
deem just and proper in these circumstances.
53
Dated: August 23 2007, in Guaynabo and San Juan, Puerto Rico.
Gary H. Montilla-Brogan, Esq. Pedro J. Santa-Sanchez, Esq.

ALB Plaza, Suite 400 Luis C. Marini Biaggi, Esq.
#16 Ave. Las Cumbres (St. Rd. 199) O’NEILL & BORGES
Guaynabo, Puerto Rico 00969 250 Munoz Rivera Avenue
Tel: 787.474.5447 San Juan, Puerto Rico 00918-1813
Fax: 787.474.5451 Tel: 787.764.8181
Fax: 787.753.8944
By: /s/ Gary H. Montilla-Brogan_____ By: /s/ Pedro J. Santa-Sanchez____

Gary H. Montilla-Brogan Pedro J. Santa-Sanchez
USDC-PR 124805 USDC-PR 126209
By: /s/ Luis C. Marini-Biaggi__________

Luis C. Marini-Biaggi
USDC-PR 222301
Of Counsel:
Richard A. Rothman, Esq.

David A. Hickerson, Esq.
Diane Harvey, Esq.
Christopher R.J. Pace, Esq.
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Tel: 212.310.8000
Fax: 212.310.8285
Attorneys for Plaintiff Westernbank

Puerto Rico
54

Westernbank v. Kachkar, RICO Amended Complaint

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Westernbank v. Kachkar, RICO Amended Complaint

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Case 3:07-cv-01606-ADC Document 3 Filed 08/23/2007 Page 1 of 54

UNITED STATES DISTRICT COURT

Plaintiff Westernbank Puerto Rico (“Westernbank”), for its First Amended

Complaint (“Complaint”) against the above-listed Defendants, alleges as follows:

1. This is an action brought for violations of the federal Racketeer Influenced

numerous contractual obligations owed to Westernbank. Westernbank, through its asset-based

obligations of the Inyx Companies to WBC.

invoices were fraudulent and uncollectible.

4. The Inyx Operators also surreptitiously caused Inyx customers to direct

5. Another fraudulent scheme by the Inyx Operators was to cause certain

JURISDICTION AND VENUE

Nation, and the amount in controversy exceeds $142 million.

8. Venue is proper in this Court under 18 U.S.C. § 1965(a) and 28 U.S.C.

the agreements or the relationship between the parties.

9. Westernbank is a Puerto Rico banking corporation with its principal place

10. Jack Kachkar is a Canadian citizen who resides in Florida.

14. Rima Goldshmidt is a Canadian citizen who resides in Canada.

15. Viktoria Benkovitch is a Canadian citizen who resides in Florida.

. Westernbank’s Financing Arrangements With the Inyx Companies.

. The USA Loan Agreement.

Agreement”) (attached Exhibit 1) with Westernbank.

secretary of Inyx and a director of Inyx USA).

referred to hereinafter as the “USA Borrowers.”

Borrowers under the USA Loan Agreement.

Westernbank to secure the performance of the USA Loan Obligations, including:

(d) The USA Borrowers executed a Trademark Collateral Assignment and

(e) The USA Borrowers executed a Collateral Assignment of Manufacturing

[A]ny representation, warranty or statement of fact made by Borrower to Lender

[T]here shall be a material adverse change in the business, assets or prospects of

27. If an Event of Default occurs under the USA Loan Agreement,

demand immediate payment from the USA Borrowers.

. The EU Loan Agreement.

Pharmaceuticals Limited, f/k/a Celltech Manufacturing Services Limited (“Ashton”), entered

both Inyx EU and Ashton.

30. Under the EU Loan Agreement, Westernbank agreed to lend up to $35.5

proper purposes provided in the EU Loan Agreement.

Westernbank a security interest in all, or nearly all, of their assets.4

32. Westernbank properly perfected its security interests granted by the EU

Borrowers under the EU Loan Agreement.

33. If an Event of Default occurs under the EU Loan Agreement, Westernbank

immediate payment by the EU Borrowers.

executed a Cross Default Agreement-Security Agreement with Westernbank (“Cross Default

Agreement”) (attached Exhibit 10), whereupon the parties agreed that:

(b) In the case of an Event of Default under either Loan Agreement,

receiving a continuing general lien and security interest therein as security

indebtedness” of the EU Borrowers under the EU Loan Agreement.

36. Westernbank and the EU Borrowers further executed other security

agreements that guaranteed to Westernbank performance of all EU Loan Obligations. These

included a Collateral Assignment of Claims and a Collateral Assignment of Licenses by the EU

Borrowers, both assignments dated August 31, 2005.5

. Secured Over Formula Advance Loan.

. Guarantees of the Individual Defendants.

. The Fraud Guarantees.

Guarantees” (attached Exhibit 13).

. The Personal Guarantees.

39. On June 7, 2007, Kachkar and Benkovitch executed an Amended and

40. On June 20, 2007, Kachkar and Benkovitch executed an additional

Guarantee for $30.1 million, which remained “continuously in effect.”

. The Inyx Operators’ Fraudulent Conduct.

. Schemes Involving Fraudulent Invoices.

under the lines of credit.

Companies, and with the intent to defraud Westernbank.

. Fraudulent “Prefix 7” Invoices.