Hartford Business Journal

6 Hartford Business Journal • October 1, 2018 • www.HartfordBusiness.com Reporter's Notebook Matt Pilon | mpilon@HartfordBusiness.com Health Care/Bioscience, Startups & Entrepreneurs, Government/Law and Energy LEGAL & COURTS Prosecutors: Bloomfield fraudster lived high life as cryptocurrency venture crumbled H omero Joshua Garza, former CEO of a now-defunct Bloomfield cryptocurren- cy company, will report to prison for a 21-month fraud sentence in January. Garza's surroundings will be decidedly more spartan than what prosecutors say he became accustomed to when money was rolling in to his companies, Gaw Miners and ZenMiner, with the help of lies told to investors. In April 2015, not long after a fraudulent, last-ditch effort to rescue his failing busi- ness through the launch of a new virtual coin bombed spectacularly, Garza traveled to Dubai, racking up more than $100,000 on his credit card, according to docu- ments filed by prosecutors ahead of Garza's Sept. 13 sentencing in Hartford. During the nine months he operated Gaw Miners, which reported about 35 employees in 2014, prosecutors say Garza had lied to convince customers to buy shares in a virtual mining operation and a new currency he created called PayCoin. He used proceeds from newer cryptocurrency mining sales to pay out previous investors what they were owed, prosecutors said. The money was good. Garza drove fancy cars — including a Ferrari, Lamborghini and Mase- rati — and in 2014 took a private jet to Las Vegas, where he spent $30,000 at night clubs, and rented a Hummer limousine and multiple hotel rooms, prosecutors said. While Garza partied on the strip, one Gaw customer, identified in court documents only by his initials, R.P., was suffering from termi- nal pancreatic cancer. The man, who had sunk his life savings of $25,000 into Gaw hoping to provide more money for his family, died in 2015 at age 34, the money lost, prosecutors say. R.P.'s story was one of approximately two dozen that prosecutors shared with the court ahead of Garza's sentencing. The victims, hailing from mul- tiple countries, were damaged to the tune of $9.2 million. Garza pleaded guilty last year to wire fraud in relation to the scheme. One customer invested $45,000 of his own and his landlord's money, and was ultimately forced to live in his car after the funds disap- peared. Others were forced to liquidate retire- ment accounts and take out loans to cover the money they sunk into Gaw. "The defendant is responsible for the suffering of these victims. And the victims are entitled to justice," Assistant U.S. Attorney John T. Pierpont Jr. wrote to the court on Sept. 6, characterizing Garza's decision to mislead investors as deliber- ate and calculated. Pierpont urged Judge Robert N. Chatigny to send a message to other would- be cryptocurrency fraudsters that white-collar crimes, which have been relatively rare in the crypto world, would be prosecuted. Garza could have done worse than 21 months. Sentencing guidelines under his plea deal ranged from 63 to 78 months, records show. In his own sentencing memorandum filed with the court, Garza expressed remorse for those he hurt. He said he started Gaw for legitimate reasons, but the taste of financial freedom turned him to greed and poor decisions. "I put myself before others, I was blinded by selfishness and greed and there is really no excuse for my actions," Garza wrote to the court. "There is not a single excuse I can offer." After Gaw fell apart, Garza and his attorneys said that he and his wife left Connecticut for Vermont, and were ultimately forced to sell their home, his wife's wedding ring, and tap public benefits to help feed their children. They faced threats of violence on internet cryptocurrency message boards. In March of last year, with legal actions piling up against him and little money to support his family, Garza called his mother for help. They argued. The next morning, he found out she had died from a medication overdose. "To this day, I replay our conversation in my head and still wonder what would have hap- pened if I had not put so much pressure on her," Garza wrote to the court. "This is something I will struggle with for the rest of my life." Garza wrote that he has started a new company in another state, though court documents, some of which are partially redacted or fully sealed, don't disclose the name. The money it's earning could help repay victims, according to Garza. However, Garza told the court that he didn't believe the venture could survive if he was in- carcerated. He's set to report to prison Jan. 4. Marjorie J. Peerce, Garza's lawyer, said in an email her client "respects the Court's sentence." "He will serve his sentence and return to his wife and family, and resume being a productive member of society," Peerce said. ENERGY & UTILITIES Utilities notch legal win in natural-gas fight Eversource and Avangrid have notched a legal victory in their ongoing fight to dis- credit allegations that their natural-gas ordering practic- es cost New England ratepay- ers an additional $3.6 billion between 2013 and 2016. Last month, a federal judge in Massachusetts granted the two utility companies' motion to dismiss a proposed class action lawsuit filed by a group of New England ratepayers, including four from Connecticut, alleging violations of federal antitrust and state laws in relation to how the utilities reserve gas pipeline capacity. The Nov. 2017 suit cited a report from a group of economists and academics, including one from the En- vironmental Defense Fund, who claimed the utilities had artificially constrained pipe- line capacity by reserving more space than they needed, leading to higher natural gas and electricity prices in New England. The dismissed law- suit argued that ratepayers are entitled to damages and injunctive relief. Eversource has called the report flawed and threat- ened a defamation lawsuit against its authors. The utility also issued its own report rebutting the claims. On Sept. 11, Judge Denise Casper sided with the utili- ties, ruling that the ratepay- ers' claims were preempted by the "filed rate doctrine," which bars courts from set- ting aside or second-guess- ing rates approved by the Federal Energy Regulatory Commission (FERC). Casper also ruled that the plaintiffs lacked antitrust standing and hadn't suffered an antitrust injury, among other issues. The Connecticut Public Utilities Regulatory Author- ity (PURA) initiated a review of the two utilities' natural gas practices after the critical report published last year. PURA hasn't issued a decision in that docket, but a FERC inquiry concluded in February that there was no evidence of capacity with- holding. HEALTH CARE Hospital facility-fee revenues decline The amount of money Connecticut hospitals earned from "facility fees," which are charged to patients who receive services at hospital-owned outpatient clinics, dipped last year despite patient visits remaining flat. Revenues from the fees, which have been criticized by consumer advocates for lacking transparency, totaled $410.1 million in 2017, down from $417.1 million a year earlier. Top 5 CT hospitals or health systems by 2017 facility-fee revenue Stamford Hospital $100 million Yale New Haven Hospital $54.3 million Western CT Health Network $50.2 million Trinity Health Of New England $39.7 million Hartford Hospital $37.9 million Source: Office of Health Strategy Homero Joshua Garza, former CEO, Gaw Miners and ZenMiner. PHOTO | HBJ FILE

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