A group of plaintiffs have filed a $25 million racketeering suit in Cook
County Circuit Court, alleging that for more than 10 years, several major
players on the commercial real estate and financing scene have swindled
hundreds of victims out of millions of dollars through loans based on inflated
appraisals of hotels and motels across the Midwest.
The eight-count suit, which was filed Jan. 30, alleges
fraud, the aiding and abetting of fraud, unjust enrichment, racketeering and
conspiracy. The plaintiffs cite
violations of federal and state laws for some of the counts.
Defendants named in the action include: Lehman Brothers Bank
and affiliates; Capital Crossing Servicing Co. and Capital Crossing Holdings;
Phoenix Asset Optimization and Phoenix Asset Management; Advanced Appraisal and
affiliates, of suburban Itasca; the Chicago law firms of Wolin & Rosen and
SmithAmundsen; and State Bank of Texas.
The suit also names four men individually as defendants:
Chandrakant Patel, of Texas, chairman of the State Bank of Texas; Hiren Patel,
of Illinois, former chairman of National Republic Bank; Edward Fitzgerald, of
Florida, former president of National Republic Bank; and appraiser William
Daddono, of Illinois.
Plaintiffs are: Delaware Motel Associates; Independence
Management Associates; C. Patel Co.; Turkey Foot Lake Road Land Holdings;
Champakbhai N. Patel; and Jashvanti C. Patel. They are represented by Chicago
lawyer Paul Caghan.
Plaintiffs alleged the financial companies paid “excessive
compensation” to Daddono and his staff at Advanced Appraisal, to make “grossly
inflated” appraisals of hotels and motels. With the appraisals in hand, they
then allegedly extended “toxic, corrupt and inflated” loans to “high net-worth
individuals who were unsophisticated in the ownership of commercial properties
and had assets that could be surrendered or seized,” plaintiffs said.
As a result of these allegedly nefarious loans, defendants
were able to seize hotels and other properties that failed as a result of the
loans, then sell the properties at “extortionate prices.” Defendants’
activities allegedly reached into Illinois, Wisconsin, Indiana, Ohio and
This alleged scheme was purportedly hatched by National
Republic Bank around January 2001. The bank failed in 2014, but the other
lenders were allegedly aware of the fraud for several years before, according
to the suit. In fact, these companies “waited in the wings” for National
Republic to fail, and after it went under, the lawsuit alleged they acquired
the loans and continued the operation where National Republic left off.
The law firms listed in the suit allegedly took part by
preparing documents and pursuing litigation that furthered the interests of the
alleged scam, as well as by allegedly transmitting the false appraisals to
plaintiffs and other borrowers.
Plaintiffs said they became aware of the alleged scheme in
December 2016, when information emerged from a criminal investigation by the
U.S. Treasury Department, the Federal Deposit Insurance Corporation and the
Federal Reserve System.
A status hearing is set for March 27. The case is assigned
to Cook County Associate Judge James E. Snyder.