A Florida man who defrauded investors of an estimated $175 million, including area municipalities and school districts, was arrested by federal authorities on Jan. 6, attempting to flee the country to avoid incarceration.
Orlando, Florida resident Nikesh Patel pleaded guilty in federal court in 2016 to five counts of wire fraud connected to a scheme in which his company, First Farmers Financial, sold tens of millions of dollars in fraudulent loans to investors.
Oak Parkers first became aware of the fraud scheme in 2014, when Village Manager Cara Pavlicek told the Oak Park Board of Trustees that the village had lost more than $600,000 due to its participation in the Illinois Metropolitan Investment Fund (IMET), which invested over $50 million in First Farmers loans on behalf of approximately 300 Illinois governmental agencies.
Oak Park Chief Financial Officer Steven Drazner told Wednesday Journal in a telephone interview that the village lost about $612,000 in the IMET investment. Drazner said the village has been reimbursed about $30,000, so far.
Other losses from area government entities include: Oak Park School District 97, $716,859; District 90, $205,000; District 91, $199,412; and the village of River Forest, $145,447. Neither District 200 nor the village of Forest Park invested in the IMET fund.
Of the area entities that lost money in the IMET investment, the villages of Oak Park and River Forest were the only two to report having received partial reimbursement. River Forest Village Administrator Eric Palm said the village has recovered $7,235.
Patel was scheduled to appear before U.S. District Court Judge Charles P. Kocoras on Jan. 9 for sentencing.
But Patel, who faces years in prison, instead attempted to flee to Ecuador, according to court documents.
According to a criminal complaint filed in Illinois district court, FBI agents in Orlando observed Patel and a companion enter Kissimmee Gateway Airport, in Kissimmee, Florida, about 7 p.m. on Jan. 6.
Agents spoke with Patel, who told them he was attempting to travel to Ecuador because he had been granted political asylum in the country.
“Patel stated that approximately two months earlier, he obtained a passport from a friend in India,” the criminal complaint states. “Agents recovered a passport that appeared to be issued by the government of India, bearing Patel’s name, photograph, and date of birth.”
Patel also told agents he had paid his traveling companion $40,000 to arrange his travel to Ecuador.
Randy Lending, an attorney with Chicago-based law firm Vedder Price, which is representing IMET in the matter, said the investment fund, which was also a victim of fraud, is “pleased the justice process is working.”
He noted that the assets seized from Patel total about $79.6 million.
They are being held in receivership by Patrick Cavanaugh, a partner with the Chicago-based consulting firm High Ridge Partners LLC.
Steven Towbin, an attorney with Chicago-based law firm Shaw Fishman, which is representing High Ridge Partners, said in a telephone interview that High Ridge is the second receiver appointed to the case. The first receiver, appointed at the beginning of the case, captured $8.6 million, which was generated by liquidation of some of Patel’s assets.
That $8.6 million was disbursed back to investors proportionally based on the size of their investment in the First Farmers loans.
Towbin said the $79.6 million currently in custody of the receiver is being held while the federal government determines whether it will make a claim on unpaid taxes owed by Patel.
The IRS has first dibs on the funds, Towbin said.
“Government policy says in the case of a fraud like this one that the government will consider subordinating its claim to the investors,” Towbin said. “So we, on behalf of the investors, have spent a lot of time and effort providing information to the IRS to get them to subordinate their claim, and if they do, most, if not all, will go back to the investors.”
He said the question of whether the government will give up its claim on the funds is now being reviewed by the Department of Justice. It is uncertain how long subsequent reviews will take before a decision is announced.
“Nobody wants to get this done faster than we do,” Towbin said.