The chief executive of what was touted as a $100 million investment fund aimed in part at Ohio medical device companies has been indicted for his alleged role in the failure of a suburban Cleveland credit union.
The indictment of 43-year-old businessman Eddy Zai, who was charged with 34 counts related to more than $16 million in unpaid loans, raises questions about the future of the Cleveland Bio Fund, which was planning to invest in small- to medium-sized medical device companies that were looking to expand in China.
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Zai surrendered to the FBI this morning, The Plain Dealer reported.
A spokeswoman for the Cleveland Bio Fund said the group would continue.
“The Cleveland Bio Fund is an independent private equity fund that will continue to operate and search for cross-directional business opportunities with China,” she said. “Eddy will no longer be involved. Kristen Laughlin will continue to work on the initiative for the near term until permanent staffing is determined.”
Cleveland Bio Fund was planned to source deals on behalf of Newsummit Pharmaceutical Group, a Chinese company that is backed by renowned U.S. venture capitalists Sequoia Capital and other venture firms. Zai told MedCity News in September that the fund would begin by scouting deals in the Cleveland area and then branch out to the rest of the country.
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“We’re as surprised as everyone else” to hear of Zai’s indictment, said a spokeswoman for Cleveland nonprofit biomedical development group BioEnterprise, which is listed as an adviser and “key partner” on the fund’s website.
In a press release announcing the formation of the Cleveland Bio Fund, Newsummit said $30 million of the fund’s anticipated $100 million had already been secured. The fund has not announced any investments. Zai said in September that the fund planned 15 to 20 investments over the next year, but he also said he expected the fund would make an investment by the end of 2011.
Newsummit executives visited Cleveland last year to evaluate medical device investment opportunities.
Zai was also involved in another project, the Cleveland International Fund, which invests in real estate. The idea behind the fund was to source capital from foreign investors looking to take advantage of a federal program that offers green cards to foreign investors who help create jobs. In Cuyahoga County, which includes Cleveland, each investor must put up $500,000 and create at least 10 jobs to gain American residency, The Plain Dealer reported last year. (A similar Columbus-based fund associated with Zai has decided to disband, but the Cleveland International Fund will continue.)
Zai was one of 19 people indicted for roles in the collapse of St. Paul Croatian Federal Credit Union. He is charged with two counts of conspiracy, two counts of bank fraud, one count of bank bribery, 11 counts of money laundering, 17 counts of making false statements to a bank and one count of making false statements to law enforcement, according to The Plain Dealer.
[Photo from flickr user futureatlas.com]
