April 27--The Illinois Metropolitan Investment Fund has notified suburban local governments that they will receive a share of $1.63 million, part of its ongoing effort to recover funds lost due to alleged fraud.
The refund marks the second distribution by the fund, called IMET for short, since disclosing in October that it lost $50.4 million in an investment tied to loans made by a Florida lender. Federal authorities have charged Nikesh Patel of Orlando, Fla., with fraud for allegedly issuing loans to phony borrowers with fake government guarantees.
Under a separate civil lawsuit filed in Chicago, a court-appointed receiver is liquidating several commercial and residential properties, luxury cars and other assets owned by Patel to help satisfy the claims of investors.
IMET has so far recouped $2.5 million, or 5 percent, of its loss. The fund invests taxpayer money on behalf of more than 200 municipalities, school and park districts, libraries and police and fire pension funds.
"We are hopeful there will be significant additional recoveries," said Randall Lending, an attorney at the law firm of Vedder Price, which represents IMET in the recovery process.
The funds for the second distribution came from the sale of one of Patel's homes, a waterfront mansion near Orlando, and other cash, Lending said.
IMET was one of 11 participants who invested in 25 loans issued by First Farmers Financial, one of Patel's companies, according to court documents in the civil suit. The value of the loans was about $180 million. The loans were packaged into a repurchase agreement sold by Pennant Management, a Milwaukee-based investment manager.
IMET has said that Pennant investigated First Farmers and Patel before buying the loans. The loans were said to be guaranteed by the U.S. Department of Agriculture in case of default. But according to the criminal complaint against Patel, the USDA has no record of any such loans.
Patel was arrested on charges of loan fraud Sept. 30 and later released on a $100,000 bond.
Pennant, which sued Patel and related companies over the loans, alleges he used the loan proceeds to buy hotels and other commercial real estate and the waterfront mansion.
IMET and Harvard Savings Bank in northwest suburban Harvard have also joined the suit as plaintiffs. The bank lost $18 million in the soured repurchase agreement.
Last week, the judge in the civil suit agreed to appoint a second receiver to oversee all of Patel's assets other than the real estate, after a dispute arose over the payment of legal fees to Pennant's lawyers.
Lending said IMET is pleased with the appointment and hopes it will increase transparency during the recovery process.
asachdev@tribpub.com
