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United States v. Patel

United States Court of Appeals, Seventh Circuit

April 16, 2019

United States of America, Plaintiff-Appellee,
Nikesh A. Patel, Defendant-Appellant.

          Argued March 25, 2019

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 14-cr-00546 - Charles P. Kocoras, Judge.

          Before Wood, Chief Judge, and Flaum and Sykes, Circuit Judges.


         The government charged defendant- appellant Nikesh Patel with five counts of wire fraud, in violation of 18 U.S.C. § 1343, for his role in selling $179 million in fraudulent loans to an investment advisor. Patel pleaded guilty to all five counts and delayed his sentencing date for a year while he purported to help recover funds for the victims of his scheme. But, while on bond and just days before he was to be sentenced, Patel attempted to flee the United States and seek political asylum elsewhere; agents arrested him just before he boarded a chartered flight to Ecuador. The district court then sentenced Patel to 25 years' imprisonment followed by 3 years' supervised release. Patel appeals, arguing that his sentence is both procedurally and substantively unreasonable. We affirm.

         I. Background

         A. Patel's Fraud

         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 improved rural communities in specified ways. To obtain its certification for this program, Patel and Fisher created and submitted documents to the USDA falsely representing the financial 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 payments 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.

         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 provided these documents to Pennant. Based on these false documents, 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 portion 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 Florida 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 invested in the fund. These purportedly represented payments 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 different investment advisor. Patel then spent another $130 million 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 disposing of any assets; a court-appointed Overall Receiver subsequently 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 collapsed 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 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 purportedly helping the Overall Receiver recover additional funds. Patel represented in his motions that he had various opportunities to earn more money for recovery as a consultant on development 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 others 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 attempted to board a chartered plane to Ecuador. In his possession, 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 Ecuador because he secured political asylum there; he had also 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, instead of earning money to pay back his victims through consulting fees and redevelopment projects, Patel and another associate 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 after his arrest at the Florida airport, ...

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