LONDON, Aug 9 (Reuters) - The chief executive of technology firm Telit has taken a leave of absence after the London-listed company said it had discovered he had been indicted in the United States 25 years ago over an alleged mortgage fraud.
Telit said in a regulatory statement on Wednesday that it had been made aware of the indictment against CEO Oozi Cats, which was later dismissed, and had appointed a law firm to review the matter, which it said was "unrelated to Telit and significantly pre-date(s) its establishment".
Cats, who could not immediately be contacted on Wednesday, was alleged in a Boston federal court in 1992 to have been involved in a "land flip" scheme that bought and sold properties at inflated prices in order to take out fraudulent mortgages, copies of court documents reviewed by Reuters show.
An arrest warrant for Cats was issued under an alternative spelling of his name, Uzi Katz, but he was never detained, according to the court documents.
Although the case against Cats was dismissed in 2006, it was not mentioned in the company's prospectus when it listed on London's Alternative Investment Market (AIM) in 2005.
Telit gave no further detail, but a source close to the company said its inquiry will focus on whether Cats' past had been adequately disclosed to the board and investors. It is expected to conclude within the next few weeks.
Shares in Telit fell by as much as 45 percent on Wednesday, taking its losses for the week to 60 percent after the company posted a shock interim loss on Monday.
Telit, whose products and services connect devices to apps and enterprise systems, was until recently one of the largest stocks on AIM and has a number of high profile shareholders, including Norway's state pension fund Norges Bank Investment Management and Allianz Global Investors.
It has also secured tens of millions of euros in low-interest loans and grants from the Italian ministry for economic development to run research facilities in the country, according to Telit's latest annual report.
But Telit has also seen elevated levels of short-selling - where investors sell borrowed shares, hoping to buy them back later at a lower price and pocket the difference - with 13.3 percent of its shares out on loan to hedge funds, according to regulatory filings, by far the highest on the AIM index.
Cats, who sold around a third of his shares in Telit in May for 24 million pounds, told Reuters in March there was "not one single economic reason" for hedge funds to bet against the firm.
On Monday Cats bought 400,000 Telit shares for 687,000 pounds. (Reporting by Alasdair Pal; editing by Alexander Smith)