Feb. 28–PEORIA — The former owner of a Peoria hotel has been implicated in a massive fraud that places roughly one third of the Downtown hotel room stock in a legal quagmire unlikely to be resolved anytime soon.
The Four Points by Sheraton closed for renovations in October 2013 and changed management companies multiple times as work continued. Alena Hospitality owned the property in October 2014 when the $10 million overhaul ground to a halt amid fraud allegations against Alena’s principal and millions in unpaid contractor invoices.
The resulting free fall has subjected the shuttered Peoria hotel to competing claims for restitution in multiple state and federal court jurisdictions, limiting accommodations in the immediate vicinity of the Civic Center and Caterpillar Inc.’s headquarters until all parties reach a settlement.
“Obviously, we want more hotel rooms Downtown,” said Chris Setti, Peoria’s assistant city manager who also spearheads municipal economic development efforts. “It’s too busy Downtown to have only 500 to 600 rooms on the market.”
At the center of the controversy is Nikesh Patel, a 30-something Orlando businessman with more than a dozen limited liability corporations, including Alena Hospitality, attached to his name on court documents. But his role as chairman and CEO of First Farmers Financial ultimately attracted the attention of the FBI and landed the Peoria hotel in the cross-hairs of Patel’s clients.
Patel specialized in packaging and selling loans administered by the U.S. Department of Agriculture’s Business and Industry Guaranteed Loan Program, an initiative intended to improve the economic and environmental climate of rural communities through funds backed by the federal government. The USDA guarantees a portion of the loans, depending on the amount and type of project involved, making the securities a low-risk investment for money managers, according to court documents outlining Patel’s alleged wrongdoing.
A Milwaukee firm with an office in Lisle identified only as “Company A” in the criminal complaint against Patel contacted the FBI in September after discovering irregularities in loan documentation from First Farmers Financial. From May 2013 to August 2014, the company completed 26 transactions with Patel worth just shy of $180 million.
But the papers Patel provided to complete the transfers were total fabrications, according to court documents. The borrowers did not exist, and the forms guaranteeing the backing of the federal government were forgeries. The USDA had no record of any of the transactions.
Pennant Management Inc., a Milwaukee-based investment firm with an office in Lisle, has since filed a federal lawsuit against Patel seeking to recover assets for the $180 million it paid for the allegedly fraudulent securities — and what the company claims are hundreds of millions of dollars in additional related losses.
On Feb. 6, a federal judge approved an order placing Patel’s hotels and other personal assets in a receivership to compensate Pennant. Among other items Patel surrendered were multiple homes, more than $6 million cash, Rolex watches, gold coins and bars, as well as a fleet of luxury vehicles with marquee models such as a Lamborghini Gallardo and Rolls Royce Wraith.
– Yet Pennant isn’t the only entity vying for Patel’s property. While the alleged USDA loan scheme was ongoing through First Farmers Financial, Patel entered multimillion-dollar contracts through Alena Hospitality for renovation of five hotels — three in Florida, one in New Jersey and the Four Points by Sheraton in Peoria.
True Line Contracting and Remodeling Services, also based in Orlando, has filed liens for millions in unpaid bills against the hotels. The contractor claims in court documents that it completed more than $9 million in improvements to Four Points but still is owed more than $2.6 million for that work alone.
Pennant disputes True Line’s claims and alleges Patel had links to the contractor that allowed him to funnel money obtained by fraud into other accounts, but the issue remains mired in a morass of court filings.
Through it all, Downtown Peoria’s largest hotel and its 319 rooms sit vacant when they could be attracting travelers and their dollars.
“It’s incumbent that we have that inventory,” said Don Welch, director of the Peoria Area Convention and Visitors Bureau. “That loss makes our job a lot more difficult.”
Patel has been free on $100,000 bond since shortly after his Sept. 30 arrest. Federal prosecutors have been granted an extension until April 1 to secure an indictment against Patel.
Matt Buedel can be reached at 686-3154 or [email protected]. Follow him on Twitter @JournoBuedel.
