Hartford Business Journal

www.HartfordBusiness.com • June 24, 2019 • Hartford Business Journal 9 Great fares now available to Dublin, London, Paris and more. Book now at aerlingus.com Love to travel Love the journey Fly from Hartford (BDL) to 25+ cities across Europe Would-be Hartford med-tech investor faces federal securities, wire fraud charges By Matt Pilon mpilon@hartfordbusiness.com I n early 2017, when the state Depart- ment of Economic and Commu- nity Development wired CliniFlow Technologies $400,000 to help relocate several of its medical-technology start- ups from New York to Hartford, along with 195 promised jobs, the company was desperate for cash. However, CliniFlow founder David Wagner, a Trinity College alum and then- trustee, quickly transferred $65,000 of those funds to an overdrawn business bank account and used $27,000 to buy his daughter a new BMW Model 320. Wagner, who was facing mounting legal troubles at the time, lied to Con- necticut officials in order to secure the funds, marking what may have been his final deal in an alleged years-long "Ponzi-like scheme," through which he and another business associate solic- ited $8 million from approximately 30 employee-investors and others. That's all according to allegations by the U.S. Attorney's Office for the Southern District of New York, which on June 14 unsealed a criminal indict- ment against Wagner and one of his corporate deputies, Marc Lawrence, charging each with five counts of wire and securities fraud. Increasingly worried that investor prospects might find information on lawsuits against his other companies, Wagner formed CliniFlow in mid-2016 to continue soliciting investments, prosecutors say. He found an unwitting partner in the state of Connecticut, when DECD transferred the $400,000 to him in Jan. 2017. Clini- Flow's bank ac- count at the time contained less than $3, despite the company hav- ing raised over $1 million in equity investments since it had formed about eight months prior. That's because "significant sums" had been transferred to Wagner him- self, the indictment says. It appears Hartford may have been Wagner's final known stop on an ap- proximately three-year journey of alleg- edly misleading employees, investors and others into funding his purported portfolio of health-technology startups. Besides CliniFlow, Wagner owned or controlled companies that also in- cluded Downing Investment Partners, Downing Digital Healthcare Group and Downing Health Technologies. Wagner and Lawrence, the indict- ment alleges, used false or misleading statements about, among other things, the financial condition of Downing portfolio companies and various own- ership stakes they held, their ability to pay salaries, their management fee structure, and the fact they had "virtu- ally no products to sell." "As alleged, David Wagner and Marc Lawrence were no more scrupulous than practitioners of three-card Monte or the shell game, but for much higher stakes," Manhattan U.S. Attorney Geof- frey S. Berman said in a statement. His office filed the wire and securi- ties fraud charges against Wagner and Lawrence in conjunction with the U.S. Securities & Exchange Commission. Attorneys for Wagner and Lawrence didn't respond to requests for com- ment as of press time. Prosecutors claim that the Downing companies used new investments to pay undisclosed management fees and compensate ear- lier employee-investors. The indictment also alleges that Wagner, in addition to buying a BMW for his daughter with Connecticut tax- payer dollars, had twice before diverted new investor money — while his com- panies were struggling to meet payroll — to purchase high-end Porsches. Lawrence, who was the president of CliniFlow and several other Wagner entities, helped Wagner mislead and recruit new employee-investors, the indictment alleges. Caught unaware The criminal charges are similar to those alleged in a number of civil law- suits by former Wagner and Lawrence hires, who said they had invested six- figure sums in connection with their job offers, and then were not paid promised salaries. Most never recovered their investments. DECD officials said they were un- aware of the lawsuits when the agency transferred $400,000 to CliniFlow. The Hartford Business Journal was the first to reveal, in Nov. 2017, the legal problems facing Wagner. DECD told HBJ in 2017 that Wagner ap- peared to have lied on his application about having pending legal issues. In the end, DECD lost the $400,000 it provided CliniFlow. The state Bond Commission awarded but never distrib- uted an additional $3.6 million to the company. David Wagner, Founder, CliniFlow

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