Johnson Controls defended CEO Alex Molinaroli following reports of his ties to a convicted swindler, saying the executive was a victim of the scam, not an accomplice.
In an Oct. 22 report, the Milwaukee Journal Sentinel detailed the relationship between Molinaroli and Joseph Zada, who was convicted on Sept. 3 in a Florida federal court on 15 counts of mail fraud in connection with an alleged Ponzi scheme.
From 1998 to 2009, Zada allegedly took funds from at least 20 investors -- including former Detroit Red Wings hockey star Sergei Fedorov -- but never invested the money. He has been ordered to pay $122 million in restitution and civil penalties.
$20 million in aid
Citing a transcript of Zada’s bond hearing, the Journal Sentinel quoted federal prosecutors who said Molinaroli offered to help Zada pay $20 million in restitution to his victims.
Molinaroli also had purchased a mansion for Zada’s use in Grosse Pointe Shores, Mich., and paid his legal bills, according to the transcript.
In a written statement issued today, company spokesman Fraser Engerman said Molinaroli was “a victim of Zada’s scheme, not an accomplice. He has not benefited from it in any way.”
Molinaroli had hoped that his loans to Zada “would ultimately facilitate repayments to all victims -- including himself,” the statement noted, adding: “Alex Molinaroli is not an ally of Joseph Zada.”
Engerman declined to make Molinaroli available for comment.
According to a 2013 Securities and Exchange Commission statement, Zada lured investors by portraying himself as a successful businessman with ties to Saudi Arabian oil ventures.
Zada also “hosted extravagant parties, drove expensive luxury vehicles, and maintained expensive homes” in Florida and suburban Detroit, the statement said.
Instead of investing the funds in oil ventures, Zada “used the money to support his lavish lifestyle and to make purported returns on investments to prior investors,” the SEC said.
Johnson Controls has asserted that Molinaroli was one of Zada’s victims.
Molinaroli has launched a major corporate reorganization of JCI, and his entanglement with Zada could be a distraction for him and the company at a time when investors are assessing its strategy.
In July, Milwaukee-based Johnson Controls announced that it would spin off its $22 billion seating and interiors unit, as it turns its focus to its other product lines: batteries and energy management for buildings.
Molinaroli, 56, became CEO in 2013, after a 30-year tenure at JCI. The board stood by him following revelations last year that he had an extramarital affair with a former consultant to the company, but JCI fired the woman’s consulting firm.
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