Ex-Cemtrex exec diverted $7.3M for personal use, SEC charges
Saagar Govil, right, CEO of Cemtrex, celebrates with his executive team and family members as he rings the closing bell at the NASDAQ market site in Times Square in June 2015. Credit: Craig Ruttle
The former managing director and controlling shareholder of Cemtrex Inc. diverted $7.3 million from the company for his personal use, according to charges filed by the Securities and Exchange Commission.
The complaint, filed in U.S. District Court in Manhattan, said that company founder Aron Govil misappropriated the Cemtrex funds between April 2016 and January 2018.
The firm, formerly based in Farmingdale, makes a "SmartDesk" with multiple monitors and a touchless interface. Its majority-owned Vicon Industries unit, based in Hauppauge, makes video monitoring systems.
The complaint filed Monday said Govil used the money to finance his personal business interests and pay personal expenses.
Govil, the father of Cemtrex chief executive Saagar Govil, also paid stock promoters to recommend Cemtrex stock "from at least September 2016 until at least 2019," according to the complaint.
While the promoters were praising the stock, the charges said, Aron Govil would sell shares without making the disclosures required of insiders.
Without admitting or denying the allegation, Aron Govil consented to a judgment that bars him from serving as an officer or director of a public company and requires him to pay at least $1.3 million in disgorgement, interest and civil penalties, the SEC said.
The proposed settlement is subject to court approval.
In a filing for the quarter ended March 31, Cemtrex said that on Feb. 26, Govil had agreed to pay the company $7.1 million related to disputed transfers to First Commercial, a company owned by Govil.
Govil, a resident of Jacksonville, Florida, declined to comment directly on the charges and said he had separated from Cemtrex in 2019.
Still, he described the SEC's enforcement actions as arbitrary.
"They charge Elon Musk," Aron Govil said. "They have nothing better to do. They're the SEC. They have a lot of muscle. They go around charging people."
At the same time, he said, short-sellers (who make money when a stock's price declines) can escape the SEC's scrutiny.
(In 2018, Musk agreed to step down as Tesla Inc. chairman and pay a fine, while retaining his CEO role, in connection with securities fraud charges filed by the SEC.)
Govil's attorney did not immediately respond to a telephone message.
An SEC spokesman declined to comment beyond the complaint.
In January 2019, Cemtrex disclosed in government documents that it had moved from Farmingdale to Queens. The company's latest headquarters is listed on SEC documents as Brooklyn.
Shares of Cemtrex fell 4.35% Tuesday to close at $1.32.
The SEC charges also said that Aron Govil, while serving as CEO of another company, Hicksville-based Telidyne Inc., falsely told investors that the company had developed an app for cryptocurrency transactions and was working on another app to detect COVID-19.
A call seeking comment from Telidyne was not immediately returned.
Shares of Telidyne fell 16.2% to $1.55 in Tuesday afternoon trading.
The SEC said the investigation is continuing.
Ken Schachter covers corporate news, including technology and aerospace, and other business topics for Newsday. He has also worked at The Miami Herald and The Jerusalem Post.
