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January 21, 2019 Legal & Courts

Would-be Hartford med-tech investor loses assets in court

David Wagner, founder, CliniFlow Technologies
Matt Pilon

With a federal judge's approval, a lender has seized core assets from CliniFlow Technologies, a company that burned through $400,000 of taxpayer money in a failed campaign to build a $45 million med-tech hub in Hartford's South End.

Court records show that Ohio-based Wesley Holdings officially took ownership of the assets from CliniFlow subsidiary 3si Systems on Dec. 26, after being the sole bidder in a court-ordered auction the month prior.

The assets include software, computers, distribution rights, patents and other intellectual property, much of it related to a hospital operating room voice command system 3si was developing, according to court records.

Wesley originally filed suit in May 2017 against 3si, its principal David Wagner and a number of other entities he controlled, alleging they had violated the terms of a $1.3 million loan agreement. The total owed has since grown to more than $3 million, due to interest and other costs.

CliniFlow is a little-known company, but state officials hailed its decision in 2017 to move from New York to a distressed Hartford corridor, where it planned to house three startups in a newly built office building and create 195 jobs in exchange for $3.6 million in taxpayer money.

While the $3.6 million in state bonding was authorized for the project, the state Department of Economic and Community Development never released those funds, because CliniFlow failed to meet certain project milestones.

However, DECD did provide Wagner $400,000 from its Small Business Express program.

In Nov. 2017, the Hartford Business Journal reported on a slew of lawsuits that accused Wagner and his associates of defrauding investors in several businesses out of millions of dollars. Some accused Wagner of operating a “Ponzi-like” scheme that used money from new employee-investors to pay back-wages of existing workers, federal court records show.

DECD officials said they were unaware of Wagner's legal troubles when they granted him state aid, even though several lawsuits against him and his companies were filed in federal courts. HBJ's story highlighted potential weaknesses in DECD's vetting process of state aid recipients.

Shortly after HBJ's story published, a DECD official said CliniFlow defaulted on its deal and that the agency was working with the Attorney General's Office to “aggressively” pursue repayment of the state funding. However, their efforts were unsuccessful.

Today, the operating-room technology that Wagner pledged to develop in Hartford remains in its infancy, and will likely require “millions of dollars to develop and commercialize,” according to Development Specialists, the court-appointed receiver in the Wesley Holdings case.

Wesley isn't the only one after Wagner's and his companies' assets, but it's unclear what assets remain. Others are suing or seeking to collect on court judgements. Meantime, Wagner filed for personally bankruptcy in Rhode Island in 2018.

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