April 11, 2018

Medtech entrepreneur defaults on state loan, files for bankruptcy

Photo | Contributed
Photo | Contributed
CliniFlow planned to relocate near Hartford Hospital's campus.
David Wagner

A New York entrepreneur who received a $400,000 economic development package from the state early last year to develop a medical-technology innovation hub in Hartford has filed for personal bankruptcy, according to court records.

Meanwhile, the Department of Economic and Community Development disclosed Monday that it declared David Wagner's company, CliniFlow Technologies, to be in default of its grant-loan package back on Nov. 14, about one week after the Hartford Business Journal detailed a history of investor fraud allegations against Wagner and his companies.

"We are now working with the Attorney General's Office to aggressively pursue repayment of the DECD funding," DECD spokesman Jim Watson said Monday. "I cannot provide any additional details at this time as this is an ongoing legal matter."

Wagner, who had once pledged to build a $45 million med-tech center near Hartford Hospital containing several startups, filed a Chapter 7 petition in Rhode Island federal court on Jan. 17, court records show.

However, the filings do not appear to list Connecticut as a creditor. Attorney General George Jepsen's office declined to comment for this story on how the state is pursuing repayment.

The bankruptcy petition claims Wagner is not employed, has just $4,260 per year in income and that he is on Medicaid.

He reported owing between $1 million and $10 million in debts, while having assets worth an estimated $60,000 or less.

Deutsche Bank National Trust Co. asked the court for relief from Wagner's bankruptcy stay, in order to pursue foreclosure proceedings on his East Greenwich, Rhode Island home, on which Wagner owed $764,716 as of Jan. 26, according to the bank's motion, which the court granted on March 7, filings show.

Wagner and his bankruptcy attorney did not respond to a request for comment for this story.

CliniFlow Technologies is a little-known company to most in Connecticut, but state officials hailed its decision last year 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, DECD never released those funds, because CliniFlow failed to meet certain project milestones related to land leases, construction and raising private funds.

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

Legal history

HBJ's Nov. 6 story highlighted potential weaknesses in DECD's vetting process -- mainly that the agency didn't check federal court databases when vetting potential state-aid recipients.

Bart Kollen, DECD's deputy commissioner, said the agency was unaware of Wagner's past legal troubles before they seeded CliniFlow with Small Business Express funds and the Bond Commission approved the $3.6 million. He noted Wagner had answered "no" on an application question asking him if he had any outstanding, pending or anticipated legal issues.

However, information on several civil lawsuits filed in federal court against Wagner and companies he's associated with -- filed by both lenders and former employees -- was available online through the federal court system's PACER database.

One suit, filed in New York federal court in May 2016, accused Wagner and associated companies of "outright fraud" and running a "novel Ponzi scheme" that used money from new employee-investors to pay back-wages of existing workers, federal court records show.

Another, also filed in New York by a creditor of one of Wagner's companies, 3si, alleged he was running a "ponzi-like fraud scheme" in which the company misrepresented its financials to get a loan before transferring 3si's assets to a new company, CliniFlow.

Kollen told HBJ last year that CliniFlow provided DECD limited financial information, which isn't unusual for startups. DECD also reviewed CliniFlow's business plan, conducted a basic Google search, and cross-referenced the company with the state Department of Labor and Secretary of the State's office.

Following HBJ's story, DECD said it would change the way it vets out-of-state businesses that seek economic incentives, but wouldn't elaborate further.

Meantime, Wagner -- a Trinity College alum who previously sat on the private school's board of trustees -- is also being sued in state court by a landlord who owns an office building at 425 Franklin Ave. in Hartford, where CliniFlow leased nearly 4,200 square feet of office space but fell behind on its rent payments, the suit says.

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