ALEXANDRIA, Va. — A well-heeled political donor and committee member at this summer’s Democratic National Convention was arrested Thursday and charged with using his health technology company to run a $30 million investment fraud scheme.
Sreedhar Potarazu, an ophthalmogist from Potomac, Maryland, has given to Democrats and Republicans, but it is his large contributions to the Democratic National Committee that put him in the spotlight. A series of hacked emails released by WikiLeaks show DNC officials debating whether his donations of more than $300,000 merited a seat next to President Barack Obama at an event. DNC staffers also express frustration in the emails about Potarazu’s persistence in seeking an audience with Obama.
The fraud scheme outlined Thursday in court papers contains no direct link to his political donations. Federal prosecutors in Alexandria say Potarazu convinced people to invest millions in his company by hiding his tax liabilities and lying about the company’s finances.
Specifically, according to an FBI affidavit, Potarazu raised $30.5 million from more than 160 investors between 2011 and 2015. One shareholder invested approximately $16 million, including a payment of $344,000 as recently as August. The shareholder and others were investing in Potarazu’s company, McLean-based VitalSpring Technologies, which provided technology to companies that was supposed to help them analyze and control their health care costs.
But according to the affidavit, VitalSpring failed to pay $6 million in employment taxes from 2007 to 2015, and Potarazu never informed investors of the liability. The affidavit also accuses Potarazu of falsely telling investors that a sale of the company was imminent, and would provide a profit to investors, when no such sale was in the works.
The affidavit said that in addition to his salary, Potarazu pulled $900,000 from the company for personal expenses, even as tax returns showed the company lost $31 million between 2007 and 2013. Meanwhile, Potarazu was telling investors at a 2015 shareholder meeting that the company had $32 million in revenue in 2014, though tax records show the figure was grossly overstated, according to the affidavit.
Potarazu has faced civil lawsuits related to his company for years, with multiple tax liens and civil judgments filed against him, according to court records.
Calls and emails to Democratic Party officials seeking comment were not immediately returned Thursday, though party officials confirm that Potarazu was appointed to serve on the credentials committee at the Democratic National Convention in Philadelphia in July.
Despite his connections to the Democratic Party, Potarazu also made numerous donations to Republicans, according to campaign-finance records compiled by the Center for Responsive Politics. Those records show donations to Marco Rubio and Mitt Romney as well as Hillary Clinton. He was a frequent guest of Fox Business and other cable news shows, and in one appearance billed himself as a supporter of Republican John Kasich.
At Thursday’s initial appearance, Potarazu was ordered held pending a detention hearing set for Friday afternoon. The wire fraud charge carries a potential maximum sentence of 20 years.
Potarazu did not speak during the brief hearing, and family members declined comment. His attorney, Timothy Belevetz, also declined comment.
Associated Press Writer Brian Witte contributed to this report from Annapolis.