A Florida man who defrauded investors by an estimated $175 million, including area municipalities and school districts, was arrested by federal authorities on Jan. 6 for attempting to flee the country to avoid prison.
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.
Local officials were made aware of the fraud in late 2014, when officials from the Illinois Metropolitan Investment Fund (IMET), which invested over $50 million in First Farmers loans on behalf of approximately 300 Illinois governmental agencies, first reported the problem.
Local school districts appear to have been the agencies most affected by the fraud, since many of the districts serving the Landmark coverage area are served by the Proviso Township School Treasurer’s Office, which had invested more than $2 million across 14 school districts in the fraudulent fund.
In early 2015, the Landmark reported that Riverside-Brookfield High School’s share of the fraudulent investment was $181,482; Riverside District 96’s ranged from $140,000 to $250,000 and Brookfield-LaGrange Park District 95’s exposure was between $120,000 and $130,000.
District 95 Superintendent Mark Kuzniewski and RBHS Superintendent Kevin Skinkis said their districts had not received updates about the status of their investments from the township school treasurer’s office for some time.
“I do know that money that has been seized and a portion has been paid back, and that when the dust all clears, we have been told that the insurance will cover the rest,” Kuzniewski said. “So at the end of the day, we have been told we should lose zero, but at the same time, the money still has not been paid back.”
District 96 Superintendent Martha-Ryan Toye pointed to the district’s 2017 audit report, which states that the “most likely” loss for the district would be about $162,500.
The village of Riverside did not expect to lose much of its investment in the fraudulent fund. In 2015, the village reported that just $16,000 of the village total investment of more than $580,000 in the fund had been frozen.
Neither the village of Brookfield nor the village of North Riverside had invested money in the fraudulent fund.
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, at 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 that 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 said 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 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.
He said the question of whether the federal 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.
Bob Uphues contributed to this report.