January 26, 2015
By Bob Coleman
Editor, Mug Shot Monday
First Community Bank of East Tennessee ended up charging off $2.8 million from the fraud.
In early 2009, Jayesh Patel sought a loan from First Community Bank to purchase and renovate a hotel in Knoxville, Tennessee.
Patel provided to First Community Bank his individual federal income tax returns as well as what he represented were “S” corporate income tax returns for four businesses which Patel owned and controlled.
However, the tax returns were bogus. Patel had not filed tax returns since 2006.
Unfortunately, based upon the returns, First Community Bank approved a loan for $5,200,000 for the purchase and renovation of the Knoxville hotel.
The loan agreement provided that, after the purchase of the hotel, First Community Bank would disburse the balance for construction and and furniture.
In January 2010, Patel submitted a request for disbursement of loan proceeds and provided to First Community Bank a document purporting to be an invoice from a furniture supplier, Hatchett Hospitality, for $55,148 for the purchase of furniture. It was fake. No furniture has been purchased.
Later in 2010, First Community Bank increased the loan to $5,800,000, supported by more fraudulent tax returns.
The fun didn’t stop there.
In October 2010, Patel purported to sell a motel in Bristol, Virginia to a young man Patel referred to as a “nephew.”
The purchase price was $565,000 with the nephew to make a down payment of $130,000.
Patel and the nephew sought to have First Community Bank loan the balance of $435,000 to the nephew.
Patel represented to First Community Bank that the sale of the motel would help his cash flow and allow him to complete his existing hotel rennovation.
In addition to the sales agreement, Patel presented a check for $130,000 payable to Patel drawn on the nephew’s checking account dated October 1, 2010.
First Community Bank approved the loan relying upon Patel’s representation that the down payment had been made, as well as what Patel represented was his 2009 personal (fake) income tax return, and because Patel was to be a guarantor on the loan.
After closing on the loan, First Community Bank asked the nephew for a copy of the reverse of the check.
The nephew and Patel delayed producing the check, coming up with numerous excuses as to why they could not provide a copy of the reverse of the check.
On May 23, 2011, an officer of First Community Bank and others met with Patel. During the meeting, Patel admitted that the Hatchett Hospitality invoice was false and fraudulent, and Patel stated that at least two additional false invoices had been submitted. Patel signed IRS forms 4506 which led to the discovery that the returns provided to First Community Bank by Patel were also false and fraudulent.
On June 23, 2011, the nephew sent an email message to a First Community Bank officer acknowledging that no down payment had been made on the purchase of the Bristol, Virginia motel and claimed that an agreement had been made between Patel and the nephew for the nephew to work for Patel to satisfy the down payment.
However, in an interview later that year, the nephew acknowledged that the agreement had been created by Patel after First Community Bank had requested a copy of the reverse of the fictitious down payment check.
Jayesh is sentenced to 42 months in jail and ordered to pay restitution of $2.8 million for the bank’s loss.