Potomac CEO Pleads Guilty to $30 Million Fraud, $7.5M Embezzlement

POTOMAC, MD – A Potomac eye surgeon admitted in federal court that he stole $30 million from investors and company shareholders, and failed to pay $7.5 million in employment taxes the company owed, according to federal authroties.

Sreedhar Potarazu, 51, of Potomac, pleaded guilty Friday to charges of inducing interstate travel to commit a fraud and failing to account for and pay over employment taxes.

“For years Potarazu enriched himself by abusing the trust of his company’s many investors and stealing millions of dollars from them through a complex scheme of fraud and deceit, said Dana J. Boente, U.S. Attorney for the Eastern District of Virginia. "This case is a prime example of this office’s ongoing commitment to bringing white-collar criminals to justice.”

According to the plea agreement, Potarazu was an ophthalmic surgeon who was licensed in Maryland and Virginia, founded in or about September 2000, VitalSpring Technologies Inc. The company provided data analysis and services relating to health care expenditures. In or around the end of 2015, VitalSpring started doing business as Enziime, LLC, a Delaware corporation. From its inception, Potarazu was VitalSpring’s Chief Executive Officer, President, and served as a member of the Board of Directors.

Federal prosecutors say that beginning in 2009, Potarazu provided materially false and misleading information to VitalSpring’s shareholders to induce more than $30 million in capital investments in the company. He told shareholders numerous times that VitalSpring’s sale was imminent, which would have resulted in profits for shareholders, and also concealed that the business failed to account for and pay over more than $7.5 million in employment taxes to the Internal Revenue Service.

“Sreedhar Potarazu viewed himself as above the law – deliberately defrauding investors and stealing from the U.S. Treasury – and with today’s guilty plea, he is held accountable for his criminal conduct,” said Principal Deputy Assistant Attorney General Ciraolo. “Like other individuals who willfully ignore their employment tax obligations, Potarazu faces incarceration and substantial monetary penalties. The department will continue to work with its partners within the IRS to identify and prosecute these offenders.”

Scheme to Defraud

Federal authorities say Potarazu solicited investments in VitalSpring from investors and shareholders, and raised about $32 million since 2009 from more than 160 victim investors. He lied about VitalSpring’s financial condition, tax compliance, and alleged imminent sale to the investors.

While he told investors that VitalSpring had millions of dollars in cash reserves, the company hasn't generated a profit in seven years, officials said. He backed up his pitches using fake bank statements to some shareholders that showed inflated balances.

When shareholders in Delaware sued Potarazu in November 2014, he turned over false financial records, fake tax returns, and fake bank statements to convince them that VitalSpring was financially healthy, say federal officials.

From 2011 to 2015, in addition to his salary paid by VitalSpring, Potarazu diverted a portion of the investments from the victim investors for his own personal use.

Employment Tax Fraud

Potarazu admitted that from 2007 to 2016, VitalSpring accrued an employment tax liability of more than $7.5 million. Between 2008 and 2015, instead of paying employment tax, Potarazu transferred thousands of dollars to himself, and spent money to publish a book called, “Get Off the Dime,” as well as on a sedan car service, and travel.

Potarazu faces a maximum penalty of 10 years in prison when he is sentenced on March 3, 2017.