A 60-year-old Bronxville resident and former adjunct professor at Columbia Business School has been accused of defrauding about 30 investors who sank approximately $3 million into a startup software company.
Gregory Rorke was arrested at his Bronxville home on Oct. 31 by Federal Bureau of Investigation officers on securities and wire fraud charges involving his New York City company, Navagate Inc. On the same day, the Securities and Exchange Commission issued a cease-and-desist order against Rorke and Navagate, the company he co-founded and heads as CEO and principal owner. The SEC action could lead to civil penalties against Rorke and Navagate in addition to the two criminal charges brought by the U.S. Attorney”™s Office for the Southern District of New York.
The SEC order described Rorke as “an experienced businessman” who since 1989 specialized in turning around financially distressed companies and building new businesses. In 2000 he formed G2X and in 2006 changed the company”™s name to Navagate, a business purportedly developing software to provide sales force automation to financial services organizations.
Federal prosecutors and SEC officials claim the scheme to defraud investors began in 2009, when Rorke hired a placement agent to help sell $2 million to $2.5 million in convertible notes. The amount to be raised increased to $3.25 million in 2011, according to the SEC.
Navagate began defaulting on the notes in 2010, according to the SEC, but did not notify new investors of the defaults and raised another $2.2 million from the offering.
U.S. attorneys alleged Rorke gave investors a signed personal guarantee backed by a false financial statement indicating that he personally had at least $12 million in assets, including more than $1 million in cash, more than $5 million in “readily marketable securities” and a home worth $1.4 million. In fact, the most of the pledged assets were held solely by Rorke”™s wife and the value of some were inflated, according to investigators.
While Rorke listed zero liabilities in his statements, by 2010 he owed about $1.8 million in unpaid federal taxes and penalties, according to the complaint filed in federal court in Manhattan.
Pressed by investors demanding repayment and threatening lawsuits, Rorke in late 2012 forwarded to investors an email purportedly from a representative of Hong Kong Shanghai Bank Corp. indicating the bank had just signed a multimillion-dollar contract with Navagate for its software platform. Prosecutors claimed Rorke knew the email was “a complete fabrication.”
The court complaint said some of the 32 investors who bought Navagate notes were repaid either directly by Rorke or as a result of civil lawsuits. The company’s securities offering raised about $3 million from clients whose investments ranged from $25,000 to $500,000, according to prosecutors.
The securities and wire fraud charges each carry a maximum sentence of 20 years in prison and maximum fine of $5 million, or twice the gross gain or loss from the offense.
