In Manhattan courtroom, Pittsfield businessman goes on trial for fraud

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NEW YORK — Federal prosecutors on Monday portrayed Patrick Muraca as a schemer who coaxed investors to contribute to his two start-up biotechnology companies, only to use some of the money on personal luxuries like cigars and body jewelry for his fiance.

His defense attorney, however, insisted that the Berkshire entrepreneur ran two successful businesses, but made "one classic mistake": not hiring a bookkeeper.

"He was no accountant. He was a fool," attorney Bennett M. Epstein told the jury on Monday, the first day of Muraca's trial in Manhattan. "But sloppy accounting, even no accounting, is not a crime."

Muraca, a 49-year-old Pittsfield resident and founder of several Berkshire biotech firms, pleaded not guilty last year in U.S. District Court in New York's Southern District to charges of wire fraud and lying to the FBI and the U.S. Attorney's Office. The charges stem from alleged misuse of between $335,000 to $370,000 invested into two companies he founded — MetaboRX and NanoMolecularDX — in 2016. The companies were established to develop cancer diagnostic exams and complete cancer research.

"This is a case about lies," Assistant U.S. Attorney Katherine Kelly said during her opening statement. "The defendant lied and then he stole hundreds of thousands of investors' money."

Muraca, who is accused of misappropriating about $400,000 of company money in 2016 and 2017, spent it on his expenses related to his fiance's two restaurants — the former Sullivan Station in Lee and Leenie's Paninis in Lenox — mortgages, cigars and more, Kelly said. Then in a voluntary interview with federal investigators in November 2017, Muraca made up stories to explain each one of the purchases in question, but those explanations turned out to be false, Kelly said.

Epstein, who spent a significant part of his opening statements explaining the science between cancer diagnostic efforts, described Muraca's biotechnology projects as his "passion."

Muraca had previously served as the CEO of Nuclea Biotechnologies, but in January 2016, while the company was struggling financially, he was removed from his post, Epstein said.

In addition to Muraca's severance pay of $225,000, he also obtained the patent to one of the diagnostic tests that was in development, and then began investing more of his own money to acquire equipment and pay rent during the "formation" phase of the two companies while he looked for investors, Epstein said.

Epstein placed two Styrofoam cups on a podium in front of the jury. One was supposed to represent the money Muraca spent on startup costs to both companies; the other represented purchases that the government has called into question.

"I'm going to put all those questionable items, virtually of course, into one basket," Epstein said. "When all is said and done, the basket that consists of all his contributions far outweighs the basket of questions."

Epstein told the jury that his client was on the road four days a week meeting with hospital administrators and investors because the technology behind his companies were his "passion." While Muraca was keeping raw records of transactions, he didn't have a professional handling finances, which Epstein described as "negligence."

"In some instances, he blurred the lines by running his companies and his life from the same accounts," Epstein said. "In some instances, he obliterated those lines."

Still, his attorney said, he didn't have "malevolent" intentions.

The prosecution is scheduled to call its first witness Tuesday morning. The trail is expected to last two weeks.

In convicted on the wire fraud charge, Muraca could face a maximum sentence of 20 years in prison and a $250,000; a conviction of lying to federal investigators could result in a fine and maximum sentence of five years.

<em>Haven Orecchio-Egresitz can be reached at horecchio@berkshireeagle.com, @HavenEagle.com, @HavenEagle on Twitter and 413-770-6977.</em>

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