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October 1, 2020

Investment exec who raised $2M in Hartford medtech scheme pleads guilty to fraud

Photo | HBJ File A “no-trespass” sign surrounds two Washington Street properties, which CliniFlow Technologies' David Wagner proposed to redevelop.

David Wagner, a former New York City venture capital executive who dangled a $45-million Hartford medical technology hub to entice investments from private investors and state government alike, has pleaded guilty to securities and wire fraud.

Wagner’s Hartford venture, which involved a company he controlled called Cliniflow, raised $1.5 million in private investments and a $400,000 loan-grant package from the Department of Economic and Community Development. The state could have lost far more, as the Bond Commission had approved a $3.6 million package, but DECD pulled the approval when Wagner missed key project milestones.

Wagner had proposed to build a 70,000-square-foot building near Hartford Hospital that would house three startups and create 195 jobs.

The project, which was never built, was a final piece of an overall “Ponzi-like” scheme through which his various companies raised $8 million from employees and investors over a period of several years, prosecutors say.

David Wagner, Founder, CliniFlow

Wagner entered his guilty plea last week to two securities fraud charges and one wire fraud charge, following a plea agreement with the U.S. Attorney’s Office for the Southern District of New York.

“As he admitted in court, David Wagner conned employee-investors into handing over more than $8 million they thought would be invested in a viable operation that would generate returns,” Acting Manhattan U.S. Attorney Audrey Strauss said in a statement. “Instead, Wagner’s business was largely a sham, and employee-investor funds went to pay Wagner’s personal expenses or pay off other investors in Ponzi-like fashion.”

The three fraud counts carry maximum prison sentences of 20 years each, according to prosecutors. Sentencing is scheduled for January.

Wagner’s plea agreement requires him to forfeit $549,000 and pay restitution of nearly $7.9 million to his victims. 

Wagner’s legal woes came to light after a Hartford Business Journal investigation about his various business dealings.

DECD, which had not noticed several civil lawsuits against Wagner at the time, said he lied on the portion of his application inquiring about pending legal matters. 

After HBJ first revealed Wagner’s mounting legal troubles in Nov. 2017, DECD said it would change its vetting policies for applicants seeking state incentives.

It’s unclear how Wagner -- who filed for personal bankruptcy in 2018 and was also unable to raise a $500,000 bond to avoid having to wear an ankle bracelet after his 2019 arrest related to the criminal fraud case -- will be able to make restitution.

Earlier this year, Wagner’s attorney -- provided by a nonprofit legal aid firm that helps poor defendants in New York -- told the judge presiding over the fraud case that Wagner had no financial resources and had been working full time as a call center representative, according to a court transcript.

Charges remain pending against Wagner’s co-defendant, his former corporate deputy Marc Lawrence, who prosecutors say helped Wagner raise money from investors in Cliniflow and other entities.

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