Saturday, November 26, 2016

California Man Who Refinanced Hotel Property Convicted Of Wire Fraud and Misstatements to a Bank in Federal Jury Trial

In the legal community, many of us expected white collar prosecutions for bank financing and mortgage fraud, including cases against lenders to be on the rise. There have not been as many cases as expected. The cases still seem to be against individuals who gave false information to get a loan. While some call these "liar's loans" - most frequently they are not prosecuted unless the borrower was not able to make the loan payments. A recent case involving hotel refinancing and construction loans show what kind of bank misstatement and loan fraud cases go criminal. In the cases we have worked on, the banks put together a large package of material to make it easy for the prosecutors to work up the case.

On November 9, 2016, after a 12 day trial, a federal jury convicted Sanjiv Kakkar of wire fraud and making misstatements to a bank. The government presented evidence at trial that Mr. Kakkar presented false information to a bank in connection with refinancing a hotel property he owned in Boulder Creek, Calif. There were three basic categories of misstatements or fraud: (1) falsifying income information and tax returns where income was overstated; (2) failure to provide updated financial and tax records; and (3) submitting false information to an escrow company to get reimbursement for construction costs.  

It was alleged that in November of 2008, Mr. Kakkar sought to secure a $6 million loan to refinance the Brookdale Inn and Spa.  In connection with the loan, he submitted to a bank falsified income information and tax returns that overstated his business income.  

Further, in the months that followed, it was alleged that Mr. Kakkar did not comply with his continuing obligation under the terms of the loan to provide the bank with updated financial records and further tax documents.  There was also evidence at trial that between January and June 2009, Mr. Kakkar had an escrow company to send hundreds of thousands of dollars to him in connection with construction costs.   About $1.5 million of the loan Mr. Kakkar secured with the bank was earmarked for construction on the property.  The bank retained an escrow company to disburse portions of the loan when reimbursement for construction costs was appropriate.  Mr. Kakker allegedly submitted false and fraudulent documents to induce the escrow company to wire six progress payments totaling $509,875.  

A grand jury issued a superseding indictment against Kakkar on June 2, 2016, charging him with one count of making misstatements to a bank, in violation of 18 U.S.C. § 1014, and six counts of wire fraud, in violation of 18 U.S.C. § 1343.  Mr. Kakkar was found guilty of all the charges presented in the superseding indictment.

Mr. Kakkar is scheduled to appear before Judge Davila on February 13, 2016, for sentencing. The maximum statutory penalty for making misstatements to a bank is 30 years’ imprisonment, a $1 million fine, and five years of supervised release.  The maximum statutory penalty for each count of wire fraud is 20 years’ imprisonment, a $250,000 fine, and 5 years of supervised release.  However, any sentence would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

The sentencing will depend on a number of factors and will be a separate mini-bench trial where all kinds of factors can be raised. Restitution will be a factor as well as Mr. Kakkar's background and ability to show remorse and rehabilitation.

Posted by Tracy Green, Esq.
Office: 213-233-2260


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