SAN JOSE — A Silicon Valley-based tech executive was charged with wire fraud this week for his alleged role in a scheme to divert funds and business from his employers to a business he had a controlling and financial interest in, according to federal prosecutors.
In documents filed Wednesday, Mountain View resident Kevin Chao, 64, was accused of defrauding his employer of millions of dollars in business and software-licensing fees while serving as its global business director. Prosecutors said he directed those funds to Zillsoft, a business that he controlled, without first disclosing his interest in the company to his employers.
According to the U.S. Justice Department, Chao had a “duty to of loyalty” and a “duty to disclose outside business” to his employers. While a news release did not name the company that employed Chao, his LinkedIn profile lists him as global business director for San Jose-based Rockwell Software from January 2007 to January 2020.
Prosecutors alleged that Chao and former colleagues Richard Sze and Suryanarayana Murthy Bobba each had a controlling interest in Zillsoft and directed software-development contracts from their employer to their company. Chao allegedly arranged the contracts with Zillsoft before splitting the profits with Sze and Bobba. Sze, 56, of Saratoga, and Bobba, 55 of Los Altos were charged with conspiracy on April 24.
According to court documents, Chao also arranged the sale of Zillsoft to a third company, one that had previous partnerships with their employers, giving them additional profits unbeknownst to their employers. Chao and Sze formed another company, SPSoft China, where they also received contracts and payments from their employers, authorities said. Chao allegedly pocketed about $5.4 million from those dealings.
Chao and Bobba were also accused of secretly diverting more than $2 million to themselves while acquiring a software license for the company they worked for.
Sze and Bobba were released on bond and return to court in October. If convicted, they face a maximum of five years in prison, according to the Department of Justice.
Chao, who was originally arrested in October 2021, was released on bond Wednesday. He’ll face his next hearing on Oct. 17. If convicted of wire fraud, he’ll face a maximum of 20 years in prison.
All three men face a fine of $250,000 plus restitution if convicted.
Source: www.mercurynews.com