Cypriot Businessmen Accused Of Stock Fraud

by Lorys Charalambous, Tax-News.com, Nicosia

29 March 2002

It has emerged that US prosecutors are trying to recover profits of US$175m made from illicit stock transactions by Cyprus businessmen Roys Poyiadjis and Lycourgos Kyprianou, who were joint chief executives of US-listed AremisSoft, which filed for bankruptcy on March 15.

The Securities and Exchange Commission alleges that the two made more than $300m in secret sales of Aremis stock while the company was reporting artificially inflated revenues. The maker of business-management software says it cannot substantiate $90 million in revenue booked by its Emerging Markets Group.

Federal prosecutors issued an indictment last month against Poyiadjis, who has a British passport but lives in Cyprus, although they didn't publicly announce it until last Friday when a civil forfeiture case was filed. The suit seeks the forfeiture of funds held at Flemings Bank and Standard Bank, both in the Isle of Man.

"While the public was being misled about the true nature of AremisSoft and its revenues, Poyiadjis and Kyprianou capitalised on that fraud by secretly selling millions of AremisSoft shares through nominee corporations and offshore accounts," prosecutors say in the civil forfeiture complaint.

The SEC says Poyiadjis made about $175 million in illegal profits from trading company stock in 2000, and Kyprianou made at least $125 million. The two sold AremisSoft stock through offshore entities after the company inflated its revenue, which drove up the stock price, prosecutors said.

They claim AremisSoft inflated revenue by "grossly" overstating the value of its contracts, or even making them up, and by exaggerating the size of several acquisitions. In 1999, for instance, the company, then based in Westmont, New Jersey, announced that it had obtained a $37.5 million computer contract with the National Health Insurance Fund of Bulgaria, but the Bulgarian government said last year that the contract's value was actually $3.9 million.

Poyiadjis, who once lived in New York, and has a British passport, now lives in Cyprus, but has not responded to the allegations against him. His colleague Lycourgos Kyprianou, who is chairman of Aremis's Cypriot sister company GlobalSoft, has apparently not been indicted, and refused this week to comment on the affair.

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