Rye Executive Charged with Stealing $230,000 in Investor Funds

Thomas J. Fagan, 57, of Rye was indicted in New Jersey on charges that he stole more than $230,000 in investor funds from his two biotechnology/medical device companies for his personal use. News of the indictment was announced on Tuesday by the office New Jersey Attorney General, Jeffrey S. Chiesa.

According to a press release from Chiesa's office, Fagan, a former Bergen County Executive was previously sued by the Attorney General’s Office for defrauding nearly 800 investors of $9.5 million by selling unregistered stock in one of the companies.

Fagan, formerly of Emerson, NJ, was charged in a state grand jury indictment with misapplication of entrusted property, theft by unlawful taking, money laundering, and misconduct by a corporate official. The charges, which Chiesa's office indicate are second-degree crimes, each carry a sentence of five to 10 years in state prison. 

Fagan, according to the release, is also charged with three counts of failure to file personal income tax returns in New Jersey, for tax years 2007 through 2009, and filing a fraudulent state tax return in 2010.

"Investors entrusted Fagan with millions of dollars of their hard-earned money, which they expected he would use to advance these high-tech companies," said Attorney General Chiesa. "He allegedly repaid their trust by stealing and misappropriating hundreds of thousands of dollars and running the companies into the ground," added Chiesa. "He rightfully faces serious criminal charges.”

Fagan was the President and Chief Executive Officer of Energex Systems, Inc., for which he sold approximately $9.5 million in unregistered stock to at least 784 investors, including 228 New Jersey investors, according to Chiesa's news release.  Energex Systems was promoted as a developer of various biotech products, including ones related to blood safety. 

Only one Energex product received FDA approval, and the company never had significant sales, according to Chiesa's office, and in 2009, Fagan founded Arbios Acquisition Partners to gain control of Arbios Systems, Inc., a medical device company, and sold over $1.6 million in unregistered Arbios Systems promissory notes and stock.  Energex and Arbios Systems were based in Allendale, N.J.

The charges resulted from an investigation by the Division of Criminal Justice Financial & Computer Crimes Bureau.  The criminal investigation resulted from a referral by the New Jersey Bureau of Securities, which filed suit against Fagan and his companies, Energex Systems and Arbios Systems, on July 15, 2011.