Case: Doc #2 1-3 Filed: 09/13/17 1 of 13. PagelD 16 3 1 i: It i .ii an)" fan-.311 28%? l3 PH 2.- 28 IN THE UNITED STATES DISTRICT corona-1 u. Instinct at can? FOR THE NORTHERN DISTRICT OF OHIO EASTERN DIVISION INFORMATION Plaintiff, ?g 1 GE v, CR 359 UNITED STATES OF AMERICA, Title 18, Sections?1349,?and 1001(a)(2) (3), United States Code GARY FINGERHUT, Defendant. The United States Attorney charges: General Allegations At all times material to this Informationi A. Defendant and His Association with The Cleveland Clinic 1. Defendant GARY FINGERHUT was a resident of Solon, Ohio, which was located in the Northern District of Ohio, Eastern Division. FINGERHUT was an employee of The Cleveland Clinic Foundation (the ?Clinic?), a not?for~pro?t corporation that operated a hospital system and related entities. The Clinic was divided into various departments, which included one known as Cleveland Clinic Innovations (?Innovations?). The Clinic?s principal place of business, and, in particular, its Innovations department, were both located in Cleveland, Ohio, which is in the Northern District of Ohio, Eastern Division. Case: Doc #2 1-3 Filed: 09/13/17 2 of 13. PagelD 17 3. Innovations was the commercialization arm of the Clinic. It assisted doctors and other Clinic personnel with inventing medical products to advance patient care and marketing those products. If a technology was deemed to merit a new venture, the Clinic, through Innovations, facilitated the formation of, fundraising for, and governance of a spin?off company. 4. INGERHUT was hired as the General Manger of information technologies for Innovations in or around 2010. In or around 2013, he became Innovations? Executive Director and held this position until in or around June 2015, when the Clinic terminated his employment. 5. In or around 2012, Innovations formed a subsidiary company known as Interactive Visual Health Records to develop a visual medical charting concept of certain Clinic physicians into a functioning, marketable product. The Clinic wholly owned and funded IVHR during the development period. 6. INGERHUT was involved in hiring people to work at IVHR, including a person described herein as IVHR ?rst hired WR. as an outside consultant and later as Chief Technology Of?cer. As Chief Technology Of?cer, W.R. oversaw the actual development of the IVHR product. Among other things, W.R. was responsible for obtaining bids from outside contractors to perform software development services and preparing that information for the selection committee. 7. As a condition of their employment with the Clinic, FINGERHUT and W.R. were obligated and agreed to perform all of their employment responsibilities and duties in the best interests of the Clinic through arms-length transactions. In particular, FINGERHUT and W.R. were prohibited from receiving any sort of ?nancial bene?t from and otherwise having any sort of personal or familial ?nancial interest in third-party entities with which the Clinic did business, unless such ?nancial bene?ts and interests were expressly disclosed to the Clinic and the Clinic 3 Case: Doc #2 1-3 Filed: 09/13/17 3 of 13. PagelD 18 approved the same in advance. FINGERHUT underwent formal training on the Clinic?s business ethics and compliance policies, procedures, and requirements every year, including training on disclosure requirements relating to con?icts of interests. FINGERHUT, in turn, informed W.R. of the Clinic?s business ethics and compliance policies, procedures, and requirements, including disclosure requirements relating to con?icts of interests. 8. The Clinic relied on FINGERHUT and W.R. to disclose possible con?icts of interest in entering and managing third-party contracts. B. The Scheme to Defraud 9. W.R., in conjunction with FINGERHUT and others known and unknown to the United States Attorney, devised and intended to devise a scheme to defraud the Clinic of money and property and of the intangible right to the honest services of FINGERHUT, W.R., and others, and to obtain money and property from the Clinic by means of materially false and fraudulent pretenses, representations, and promises. 10. It was part of the scheme and arti?ce to defraud that and W.R. affirmatively represented to the Clinic that they were abiding by their agreement to perform all of their employment responsibilities and duties in the best interests of the Clinic through arms? length transactions when, in truth and in fact and as FINGERHUT and W.R. then well knew, they were not. 11. It was further part of the scheme and arti?ce to defraud that FINGERHUT and W.R. failed to disclose to the Clinic that they were causing the Clinic to enter into contracts and remain in contracts with one or more business entities in which FINGERHUT and WR. had a personal ?nancial interest. Case: Doc #2 1-3 Filed: 09/13/17 4 of 13. PagelD 19 12. It was further part of the scheme and arti?ce to defraud that W.R. and others incorporated and caused to be incorporated a shell company known as iStarFZE LLC that did not itself perform or provide any actual goods or services. 13. It was further part of the scheme and arti?ce to defraud that W.R. and others established ISTAR in the name of a nominee owner to conceal from the Clinic that W.R. was true owner and ?nancial bene?ciary. 14. It was further part of the scheme and arti?ce to defraud that W.R. caused ISTAR to hire a third-party company with the initials .M., located outside the United States, to perform software development and related services on behalf. 15. It was further part of the scheme and arti?ce to defraud that W.R. caused ISTAR to establish a mailing address, but not actual physical presence, in New York, New York, to create the false impression that it had a place of business located there. 16. It was further part of the scheme and arti?ce to defraud that W.R. caused ISTAR to establish an internet website and email addresses to create the false impression that it was an operational business entity. It was further part of the scheme and arti?ce to defraud that W.R. caused ISTAR to submit a bid to the Clinic to develop and design the software for medical charting product, without. disclosing that J.M., not ISTAR, would actually perform the contracted software development services. 18. It was further part of the scheme and artifice to defraud that W.R. caused ISTAR, in its bid, to increase the price that the Clinic paid for the software design and development services that .M. performed, without disclosing that .M. had agreed to charge a lesser amount and without disclosing ?nancial interest in ISTAR. Case: Doc #2 1-3 Filed: 09/13/17 5 of 13. PagelD 20 19. It was further part of the scheme and arti?ce to defraud that W.R. diverted the difference in price between the amount ISTAR charged the Clinic for software development services and the amount that J.M. charged ISTAR for software development services to bank accounts that W.R. controlled, for W.R. to enrich himself and to pay others to assist him with this fraudulent scheme. 20. It was further part of the scheme and arti?ce to defraud that W.R. periodically paid FINGERHUT a ?referral? or ?commission? fee, which FINGERHUT accepted, in return for FINGERHUT not disclosing the scheme to defraud, and thereby permitting ISTAR to keep the IVHR software development contract and obtain in?ated payments from the Clinic. 21. It was further part of the scheme and arti?ce to defraud that W.R. caused one or more bank accounts to be established to receive the profits of W.R. and scheme to defraud the Clinic, and to transfer the proceeds of the scheme to W.R., FINGERHUT, and others. mu (Conspiracy to Commit Wire Fraud and Honest Services Wire Fraud, 18 U.S.C. 1343 and 1346, all in violation of 18 U.S.C. 1349) 22. The factual allegations of paragraphs 1 through 21 of this Information are realleged and incorporated by references as if fully set forth herein. 23. From in or around March 2012 and continuing through on or about June 15, 2015, in the Northern District of Ohio, Eastern Division, and elsewhere, GARY INGERHUT, W.R, and others known and unknown to the United States Attorney, did knowingly and intentionally combine, conspire, confederate and agree together and with each other to devise and intend to devise a scheme and arti?ce to defraud the Clinic of money and property and of the intangible right to the honest services of INGERHUT, W.R., and others, and to obtain money and property Case: Doc #2 1-3 Filed: 09/13/17 6 of 13. PagelD 21 from the Clinic by means of materially false and fraudulent pretenses, representations, and promises, and for the purpose of executing and attempting to execute the scheme and arti?ce to defraud, caused to be transmitted by means of wire communication in interstate commerce, writings, signs, signals, pictures and sounds, in violation of Title 18, United States Code, Sections 1343 and 1346. Obiect of the Conspiracv 24. The object of the conspiracy was to enrich FINGERHUT, W.R., and others via a fraudulent scheme that diverted approximately $2.7 million from the Clinic by inserting a company in which FIN GERHUT and W.R. had concealed ?nancial interests into transactions - wherein the Clinic purchased software development services and thereby increasing the amount that the Clinic paid as a result. Acts In Furtherance of the Conspiracy 25. On or about August 9, 2012, W.R. gave FINGERHUT a ?referral fee? check in the amount of $25,000 that was the proceeds of a Clinic payment to ISTAR, which FINGERHUT deposited into a bank account that he controlled. 26. On or about September 13, 2012, W.R. caused the Clinic to transfer $45,540 to ISTAR to pay invoices in which W.R. had marked up the cost of services that .M. had provided to the Clinic in order to divert money to and others. 27. On or about September 28, 2012, W.R. caused $8,000 to be transferred from a bank account titled to ISTAR to a personal bank account that he controlled. 28. On or about October 23, 2012, W.R. caused $27,000 to be transferred from a bank account titled to ISTAR to a personal bank account that he controlled. Case: Doc #2 1-3 Filed: 09/13/17 7 of 13. PagelD 22 ?29. On or about November 9, 2012, W.R. caused the Clinic to transfer $62,240 to ISTAR to pay invoices in which W.R. had marked up the cost of services that .M. had provided to the Clinic in order to divert money to W.R., and others. 30. On or about November 16, 2012, W.R. caused $7,425 from the proceeds of a Clinic payment to ISTAR to be transferred to FINGERHUT as a ?referral fee,? which FINGERHUT accepted. 31. On or about December 14, 2012, W.R. caused the Clinic to transfer $71,392.34 to ISTAR to pay invoices in which W.R. had marked up the cost of services that .M. had provided to the Clinic in order to divert money to W.R., FINGERHUT, and others. 32. On or about January 4, 2013, W.R. caused $10,000 from the proceeds of a Clinic payment to ISTAR to be transferred to FINGERHUT as a ?referral fee,? which FINGERHUT accepted. 33. On or about March 13, 2013, W.R. caused the Clinic to transfer $75,754.67 to ISTAR to pay invoices in which W.R. had marked up the cost. of services that J.M. had provided to the Clinic in order to divert money to W.R., FINGERHUT, and others. 34. On or about March 14, 2013, W.R. caused $60,000 to be transferred from a bank account titled to ISTAR to a bank account on which he was a signatory. 35. On or about. April 4, 2013, W.R. caused $7,110 from the proceeds of a Clinic payment to ISTAR to be transferred to FINGERHUT as a ?referral fee,? which FINGERHUT accepted. 36. On or about July 9, 2013, W.R. caused $40,000 from the proceeds of a Clinic payment to ISTAR to be transferred to a personal account that he controlled. Case: Doc #2 1-3 Filed: 09/13/17 8 of 13. PagelD 23 37. On or about July 12, 2013, W.R. caused the Clinic to transfer $190,496.67 to ISTAR to pay invoices in which W.R. had marked up the cost of services that .M had provided to the Clinic in order to divert money to W.R., FINGERHUT, and others. 38. On or about July 23, 2013, W.R. caused $17,100 from the proceeds of a Clinic payment to ISTAR to be transferred to INGERHUT as a ?referral fee,? which FINGERHUT accepted. 39. On or about September 13, 2013, W.R. caused the Clinic to transfer $264,993 to ISTAR to pay invoices in which W.R. had marked up the cost of services that J.M. had provided to the Clinic in order to divert money to W.R., FINGERHUT, and others. 40. On or about September 18, 2013, W.R. caused $98,000 to be transferred from a bank account titled to ISTAR to a bank account on which he was a signatory. 41. On or about September 20, 2013, W.R. caused $20,000 from the proceeds of a Clinic payment to ISTAR to be transferred to FINGERHUT as a ?referral fee,? which FINGERHUT accepted. 42. On or about October 22, 2014, W.R. caused the Clinic to transfer $274,872 to ISTAR to pay invoices in which W.R. had marked up the cost of services that .M. had provided to the Clinic in order to divert money to W.R., FINGERHUT, and others. 43. On or about October 29, 2014, W.R. caused $60,000 to be transferred from a bank account titled to ISTAR to a bank account on which he was a signatory. 44. On or about November 3, 2014, W.R. caused $31,000 from the proceeds of a Clinic payment to ISTAR to be transferred to FINGERHUT as a ?referral fee,? which FINGERHUT accepted. Case: Doc #2 1-3 Filed: 09/13/17 9 of 13. PagelD 24 45. On or about December 23, 2014, W.R. caused the Clinic to transfer $179,958 to ISTAR to pay invoices in which W.R. had marked up the cost of services that .M. had provided to the Clinic in order to divert money to W.R., FINGERHUT, and others. 46. On or about December 31, 2014, W.R. caused $93,000 to be transferred from a bank account titled to ISTAR to a bank account on which he was a signatory. 47. On or about January 14, 2015, W.R. caused $12,000 from the proceeds of a Clinic payment to ISTAR to be transferred to FINGERHUT as a ?referral fee,? which FINGERHUT accepted. The Use of Interstate Wires in Furtherance of the Conspiracy 48. For the purpose of executing and attempting to execute the scheme and artifice to defraud described above, INGERHUT, W.R., and others caused to be transmitted by means of wire communication in interstate commerce, writings, signs, signals, pictures and sounds, to and from the Northern District of Ohio and elsewhere. Such interstate wires included, but were not limited to the following: Description of Interstate Date Wire Origination Location Recipient Location ISTAR US. Bank Acct Check #5730 in the amount Cleveland Clinic PNC X8603, San Francisco, September 13? 2012 of $45,540 Bank, Cleveland, Ohio California, through St. Paul, Minnesota Huntington Bank Check #5004 in the amount ISTAR Bank Account X6345 September 28, 2012 Account X8603, of $8,000 l'f . . (controlled by W.R.), a 1 ornia Lakewood, Ohio ISTAR US. Bank PNC Bank Acct x9116, October 23, 2012 Wire Transfer of $27,000 Account X8603, (controlled by W.R. California MR.) Cleveland, Ohio Wire transfer of $62,240 in Cleveland Clinic PNC ISTAR U.S. BanknAcct November 9, 2012 payment of ISTAR . X8603, San Franmsco, . . Bank, Cleveland, Oth . . 1nvorces Californla Case: Doc 1-3 Filed: 09/13/17 10 of 13. PageID 25 November 16, 2012 Wire transfer of $7,425 Bank Acct x1873, W.R.), Lakewood, . . St. Paul, Minnesota Oh1o Wire transfer of Cleveland Clinic PNC ISTAR US. Bank Acct December 4, 2012 $71 392 34 Bank Acct, Cleveland, x8603, San Francisco, Ohio California January 4, 2013 Wire transfer of $10,000 Bank Acct x1873, W.R.), Lakewood, St. Paul, Minnesota Ohio Wire transfer of Cleveland Clinic PNC ISTAR US. Bank Acct March 13, 2013 Bank Acct, Cleveland, x8603, San Francisco, $75,754.67 . . . Ohio Callfornia ISTAR US. Bank Acct PNC Bank Acct X91 16 March 14, 2013 Wire transfer of $60,000 x8603, San Francisco, (controlled by W.R.), California Cleveland, Ohio . ISTAR US. Bank Acct PNC Bank Acct X91 16 July 9, 2013 Wire transfer of $40,000 x8603, San Francisco, (Controlled by W.R.), California Cleveland, Ohio . . Cleveland Clinic PNC Electronic of ISTAR US. Bank Acct My 12? 2013 $190,496.67 Bank x8603, California A FINGERHUT July 23, 2013 Wire transfer of $17,100 Bank Acct x1873, W.R.), Lakewood, . . . St. Paul, Minnesota Oth Cleveland Clinic PNC September 13, 2013 Electronic depositXACH of Bank Acct, Cleveland, ISTAR Bank Amt . x8603, California $264,993 01110 ISTAR US. Bank Acct Huntington Bank Acct September 18, 2013 Wire transfer of $98,000 x8603, San Francisco, x6345 (controlled by California W.R.), Lakewood, Ohio Cleveland Clinic PNC ISTAR US. Bank Acct October 22, 2014, Wire transfer of $274,872 Bank Acct x1715, x8603, San Francisco, Cleveland, Ohio California ISTAR US. Bank Acct Huntington Bank Acct October 29, 2014, Wire transfer of $60,000 X8603, San Francisco, x6345 (controlled by California W.R.), Lakewood, Ohio . . . Cleveland Clinic PNC December 23, 2014 Electronic deposrt/ACH of Bank Acct Cleveland, ISTAR US. Bank Acct $179,958 Ohio X8603, Califomia December 31, 2014 Wire transfer of $93,000 ISTAR US. Bank Acct x8603, San Francisco, California Huntington Bank Acct x6345 (controlled by W.R.), Lakewood, Ohio 10 Case: Doc 1-3 Filed: 09/13/17 11 of 13. PageID 26 Effect of the Scheme 49. As a result of Defendant and his co-conspirators? fraudulent scheme and conduct, the Clinic sustained a loss of approximately $2,784,847. All in violation of Title 18, United States Code, Section 1349. COUNT 2 (False Statement and False Document, in violation of 18 U.S.C. 50. The factual allegations of paragraphs 1 through 21 and 25 through 49 are realleged and incorporated by reference as if fully set forth herein. 51. From in or around September 2014 through on or about the date of this Information, the Federal Bureau of Investigation which was part of the executive branch of the Government of the United States, acting in a matter within its jurisdiction, was investigating GARY FIN GERHUT, W.R., and others, in connection with their involvement and actions relating to contracting activities with the Clinic. 52. From on or about December 16, 2014, through on or about the date of this Information, a Federal Grand Jury sitting in the Northern District of Ohio was conducting a criminal investigation, pursuant to its powers as set forth under Rule 6 of the Federal Rules of Criminal Procedure, into the activities of GARY FINGERHUT, W.R., and others, in connection with their involvement and actions relating to contracting activities with the Clinic. 53. On or about June 22, 2015, a Special Agent of the FBlinterviewed FINGERHUT in connection with the investigation. 54. On or about June 22, 2015, in the Northern District of Ohio, Eastern Division, GARY INGERHUT, in a matter within the jurisdiction of the executive branch of the Government of the United States, knowingly and willfully made the following materially false, ?ctitious, and fraudulent statements and representations, and made and used the 11 Case: Doc 1-3 Filed: 09/13/17 12 of 13. PageID 27 following false writings and documents knowing the same to contain materially false, ?ctitious, and fraudulent statements: a. FINGERHUT stated to an FBI Special Agent that he was not aware of W.R. having any business dealings outside of the Clinic and that he was not aware of ?any connection? between W.R. and ISTAR. In truth and in fact, as INGERHUT then well knew, FIN GERHUT was aware that W.R. had a ?nancial interest in contract with the Clinic and was receiving ?referral fees? in which he shared. b. FINGERHUT stated to an FBI Special Agent, ?rst, that he had borrowed $100,000 from W.R. several years earlier for a home loan, and then, that he had borrowed $100,000 to $200,000 from W.R. and then later, that he had borrowed at least $350,000 from W.R. for personal expenses over the past few years. INGERHUT further stated that he had signed a note at the time of such loan, and that he intended to pay back the loan with interest. In truth and in fact, as FINGERHUT then well knew, INGERHUT had not borrowed any money from W.R. at any time. Instead, all money that received from W.R. between August 2012 and March 2015 (approximately $469,000) was kickback ?referral? or ?commission? fees paid in return for FINGERHUT permitting ISTAR to keep the IVHR software development contract and obtain in?ated payments from the Clinic; INGERHUT had no intent to pay back the money that he received. Further, in truth and in fact, as FINGERHUT then well knew, FINGERHUT and W.R. created a fake loan document to cover up the true purpose of payments to FINGERHUT. 55. FINGERHUT made the false statements and created the fake loan document described above with the intent to corruptly obstruct, in?uence and impede and to attempt to obstruct, in?uence and impede the FBI and Federal Grand Jury investigations described above. 12 Case: Doc 1-3 Filed: 09/13/17 13 of 13. PageID 28 Defendant?s false statements and documents caused Special Agents of the FBI to perform additional investigation. All in Violation of Title 18, United States Code, Section 1001(a)(2) and (3). 13 JUSTIN E. HERDMAN United States Attorney ANN ROWLAND Deputy Chief, Criminal Division