Opinion ID: 4387921
Heading Depth: 2
Heading Rank: 1

Heading: Patel’s Fraud

Text: In 2011, Patel formed First Farmers Financial LLC (“First Farmers”) with coschemer Timothy Fisher. Patel, located in Florida, was the company’s CEO; Fisher, a California banker working at Wells Fargo, was its President and COO. First Farmers was certified as a nontraditional lender engaged in USDA government‐guaranteed lending programs, including the Business and Industry Guaranteed Loan Program. Under this program, the USDA guaranteed a percentage of a loan issued to a borrower engaged in an eligible business that im‐ proved rural communities in specified ways. To obtain its cer‐ tification for this program, Patel and Fisher created and sub‐ mitted documents to the USDA falsely representing the finan‐ cial condition of First Farmers. As an eligible lender, First Farmers ostensibly originated and funded loans qualifying for this program: it arranged loans on borrowers’ behalves, obtained USDA guarantees for portions of loans, and collected interest and principal pay‐ ments from borrowers. First Farmers could also resell the USDA‐guaranteed portion of its loans to investors. Because the underlying obligations of these loans are guaranteed by the United States, they are seen as fairly risk‐free investments. No. 18‐1685 3 Pennant Management (“Pennant”) was a Milwaukee‐ based investment advisor that acquired USDA‐guaranteed loans originated by third‐party approved lenders and placed these loans into investment funds for its clients. Patel induced Pennant to acquire First Farmers loans by falsely representing that the company had millions of dollars in assets, cash on hand, and profits. None of this was true, but Patel and Fisher created false financial statements and balance sheets and pro‐ vided these documents to Pennant. Based on these false doc‐ uments, Pennant began investing with First Farmers. Between May 2013 and September 2014, Patel sold twenty‐ six loan packages to Pennant for loans that First Farmers had purportedly issued to borrowers in Florida and Georgia. Patel represented to Pennant that First Farmers had loaned money to these borrowers and that the USDA had guaranteed a por‐ tion of those loans. First Farmers then sent the USDA‐ guaranteed portion of the loans to Pennant as an investment for its clients. However, all twenty‐six loans were completely falsified—there was no borrower, no USDA guarantee, and no loan. Patel had forged USDA employee signatures on the loan packages, made up fake businesses as the borrowers, and created fake USDA loan identification numbers for these loan packages. Pennant (through its clients) paid $179 million for these fake loans, wiring most of that sum to a bank account in Flor‐ ida over which Patel alone had signatory authority. Patel later disbursed the money to multiple other bank accounts, some of which he controlled and some of which Fisher controlled. The two used some of the proceeds to make “principal and interest” payments back to the Pennant investors who had in‐ vested in the fund. These purportedly represented payments 4 No. 18‐1685 from real borrowers, but those real borrowers did not actually exist. They also used approximately $26 million to buy back three other fictitious USDA loans that Patel had sold to a dif‐ ferent investment advisor. Patel then spent another $130 mil‐ lion to purchase, renovate, and operate hotels, and he spent further proceeds on other business ventures, personal travel and expenses, homes, cars, a boat, and gifts for friends and family. Fisher also spent his share on himself, although Patel controlled more of the stolen funds. B. Patel’s Indictment, Guilty Plea, and Attempted Flight This scheme unraveled in September 2014, when Pennant employees became aware of inconsistencies relating to the First Farmers loans and were unable to verify the existence or location of certain purported borrowers. The government charged Patel in a criminal complaint with one count of wire fraud in violation of 18 U.S.C. § 1343 on September 29, 2014, and government agents arrested Patel the next day. Pennant obtained an injunction prohibiting Patel from selling or dis‐ posing of any assets; a court‐appointed Overall Receiver sub‐ sequently took over collection efforts to recover funds for the victims of this fraud (i.e., Pennant and its investors). See In re First Farmers Fin. Litig., 14‐cv‐7581 (N.D. Ill.). Pennant col‐ lapsed because of the fraud, and it no longer operates as an investment advisor. The government indicted Patel with five counts of wire fraud, in violation of 18 U.S.C. § 1343, on December 2, 2015.1 After first pleading not guilty, Patel changed his plea to guilty 1 As discussed more fully infra, the government charged Fisher sepa‐ rately with one count of money laundering in violation of 18 U.S.C. § 1957(a). No. 18‐1685 5 to all five counts via a plea declaration on December 6, 2016. The court accepted the plea and set Patel’s sentencing for April 6, 2017. From February 2017 through November 2017, Patel filed several motions to continue his sentencing hearing, all of which the court granted. Most of these requests were made by Patel, and granted by the court, because Patel was purport‐ edly helping the Overall Receiver recover additional funds. Patel represented in his motions that he had various opportu‐ nities to earn more money for recovery as a consultant on de‐ velopment projects. For example, on November 28, 2017, Pa‐ tel filed a motion to continue his sentencing because he had a “unique opportunity to earn an additional $1 million for his victims” by assisting with a redevelopment marketing study. According to the motion, this $1 million was “already sitting in Mr. Patel’s attorneys’ trust fund account,” and the Overall Receiver’s counsel supported the request for a continuance “given the opportunity Mr. Patel has to assist his victims” in their recovery. The court granted this request as it did the oth‐ ers and finally set Patel’s sentencing date for January 9, 2018. Three days before that, on January 6, government agents arrested Patel at an airport in Kissimmee, Florida, as he at‐ tempted to board a chartered plane to Ecuador. In his posses‐ sion, Patel had an Indian passport in his name, United States currency, documents relating to his attempt to obtain asylum in Ecuador, financial documents indicating access to accounts holding millions of dollars, and detailed checklists for tasks relating to obtaining asylum in Ecuador and setting up a new life there for himself and his family. Patel told the agents at the airport he was traveling to Ec‐ uador because he secured political asylum there; he had also 6 No. 18‐1685 applied for asylum in India but chose to seek it in Ecuador instead because of its extradition laws. The documents in his possession indicated Patel had planned his flight for months: he rented a house in Ecuador, opened bank accounts and transferred funds there, obtained a lawyer to help him through the extradition process, and purchased tickets for his wife and family to travel and meet him in the coming days. The government also discovered that while on bond, in‐ stead of earning money to pay back his victims through con‐ sulting fees and redevelopment projects, Patel and another as‐ sociate used fictitious identities and entities to defraud an Iowa lender out of millions of dollars. Approximately $2.2 million of the money Patel had ostensibly earned to pay back the Pennant fraud victims was newly‐stolen money. And af‐ ter his arrest at the Florida airport, while in custody awaiting transfer to Chicago, Patel continued to direct his associate on how to complete this pending fraud. C. Sentencing After these events, the court delayed Patel’s sentencing again. The hearing finally took place on March 6, 2018. In advance of the hearing, the probation office prepared an initial Presentence Investigation Report (“PSR”) on April 5, 2017 and supplemented the report twice, on October 27, 2017 and March 5, 2018. Before Patel’s attempted flight, the PSR calculated his offense level as 42, which (as relevant here) included a two‐level enhancement for his leadership role in the offense and a three‐level reduction for acceptance of re‐ sponsibility. Patel had a criminal history category of IV, re‐ sulting in a Guidelines range of 360 months’ to life imprison‐ No. 18‐1685 7 ment. However, because the statutorily‐authorized maxi‐ mum sentence for each of the wire fraud counts in the indict‐ ment was 20 years’ imprisonment, Patel’s Guidelines range was limited to 360–1,200 months. Following the flight attempt, probation adjusted Patel’s offense level to 45 by including a two‐level enhancement for obstruction of justice and excluding the three‐level reduction for acceptance of responsibility. The two‐level enhancement for Patel’s leadership role in the offense remained.2 However, the PSR treated the offense level of 45 as an offense level of 43 for calculating the applicable Guidelines range. See U.S.S.G. ch. 5, pt. A (Sentencing Table), app. n.2. Patel remained in criminal history category IV. Based on these calculations, Pa‐ tel’s new Guidelines range was life in prison, which the PSR adjusted to 100 years’ imprisonment based on the statutory maximum for wire fraud. The government requested that the district court impose a sentence of 30 years. At the hearing, Patel challenged some of the PSR calcula‐ tions, including the two‐level leadership role enhancement and the loss of the three‐level acceptance of responsibility re‐ duction. The district court rejected both challenges. First, the court concluded the leadership role enhancement applied: alt‐ hough Fisher and Patel were the only two participants in the fraud, the prime victim in the case (Pennant) dealt almost ex‐ clusively with Patel, placing him “in the cat bird’s seat of im‐ propriety.” Moreover, the court noted it had “no basis … to review the discretion of the U.S. Attorney’s Office in viewing 2 The supplemental PSR made other adjustments to the offense level calculation that are not relevant here. 8 No. 18‐1685 the two defendants differently” for charging purposes, so “what [Patel’s] argument smacks of is selective prosecution.” The court also rejected Patel’s argument that he should not lose all three points for acceptance of responsibility based on his flight attempt. The court concluded Patel’s behavior did not indicate he accepted responsibility for his actions: [H]e is hatching plans long before February of this year, long before January of this year, to abscond from the jurisdiction and to flee and become a fugitive and to go to, of all places, Ecuador, for political reasons. And what are those reasons? He does not like the United States. Can you imagine that? He is born in this country; educated; in a good family; and, turn around and use his funds, that could be applied to the recovery of people who were victimized by his lies and deceit. The district court thus adopted the PSR’s final calculations of Patel’s offense level (45), criminal history category (IV), and Guidelines range (100 years). Patel does not take issue with any of these calculations on appeal. Patel further argued at sentencing that, based on the 18 U.S.C. § 3553(a) factors, he should receive a sentence far less than the 30 years the government requested. Chief among his arguments was that a 30‐year sentence would result in an unwarranted sentencing disparity between Fisher and himself. Fisher had pleaded guilty, pursuant to a plea agreement, to one count of money laundering. As such, he faced at most a sentence of 10 years’ imprisonment based on the statutory maximum for such a charge.3 Patel argued that 3 At the time of Patel’s sentencing, the district court had not yet sen‐ tenced Fisher. On April 26, 2018, the court sentenced him to the statutory No. 18‐1685 9 this three‐to‐one disparity between Patel and Fisher was unjustified, as the two were nearly equally culpable in the First Farmers scheme. Patel further argued that a 30‐year sentence would result in an unwarranted disparity between Patel and other fraudsters involved in schemes much larger than his. Finally, Patel addressed his attempted flight to Ecuador, saying that while it was “uncalled for” and there was “no excuse,” it was not a “blank check” to impose an excessive sentence. The court again rejected Patel’s arguments. First, the court addressed Patel’s flight attempt. It discussed how Patel me‐ ticulously planned this attempt, which indicated that Patel never intended to face punishment for his “massive” fraud (which, it said, reflected a certain “diabolical genius”): But all of the plans were laid. … “What explanation can I give Ecuador as to why I want political asylum,” there is thought about that, too. And for any citizen to read that, it is a little insulting that the reason is a dis‐ taste for the country. I mean, there is a lot of things wrong with America. No two ways about that. And I am not here to wave the flag over the universe we live in here. But it is still a great country. And to turn your back on it for personal selfish reasons, to denigrate it— you know, the people are in limbo wanting to become citizens. He was born here. His citizenship was a gift of his birth. And he is so quick to throw it out because he is not going to face the piper. He is not going to maximum of 10 years’ imprisonment. See United States v. Fisher, 16‐cr‐717 (N.D. Ill.). 10 No. 18‐1685 stand before me and get sentenced, because he is not going to be here. Finally, the court rejected Patel’s disparity argument: while Fisher had not yet been sentenced and it had not seen Fisher’s PSR, the facts indicated Patel was “the most significant player” in the First Farmers scheme. Before imposing the sentence, the court asked the parties “is there anything … that you think I should have addressed more carefully or fully than I have? I know you have made a lot of points.” Both parties said no. The court then sentenced Patel to 25 years’ imprisonment (20 years’ on Count I and 5 years’ each on Counts II–V, with Counts I and II to run consecutively, and with Counts III–V to run concurrently to the first two counts), followed by 3 years’ supervised release. The court also imposed restitution in the amount of $174,791,812.50. In imposing the sentence, the court acknowledged that 25 years was less than what the gov‐ ernment asked for and “a little less than what can be and what the Guidelines say should be, because of the commonality to other cases,” but the sentence recognized “the beneficial fac‐ tors in [Patel’s] favor under [§] 3553.” Patel appeals the rea‐ sonableness of this sentence.