Fraud Friday: Pennant Demands USDA Honor $176 Million of Fraudulent Loans

November 7, 2014

By Bob Coleman
Editor, Coleman Report


Reports Paul Gores of the Milwaukee-Wisconsin Journal Sentinel

As more victims emerge in a U.S. Department of Agriculture loan fraud scheme, a Milwaukee investment firm caught in the middle is demanding the USDA make good on its guarantees.

Pennant Management Inc., which acquires loans guaranteed by the USDA or Small Business Administration and places them into funds in which community banks and others can invest, said the USDA had turned down Pennant’s request to honor guarantees on what turned out to be nonexistent loans sold by Florida-based First Farmers Financial.

The USDA denied Pennant’s claim, saying it doesn’t recognize the loans as valid, even though First Farmers Financial was a USDA-approved lender. Pennant is appealing the USDA’s decision, said Mark A. Elste, the founder and chief executive of Pennant.

“We intend on pursuing all of our remedies,” Elste said Monday. “We have to go through the formal appeals process, and if they turn that down, we will sue. We will represent our clients, all of whom believed that they had a full-faith-and-credit (of the U.S. government) note, which we obviously believed also.”

Pennant said in a federal lawsuit that Florida businessman Nikesh A. Patel, a prominent hotelier in Orlando, Fla., sold it fake loans, then used the proceeds to buy investment real estate and a lavish home. The alleged scam involved USDA-backed loans that didn’t really exist, and documents on which Patel allegedly forged USDA approval. The alleged bogus loans totaled about $176 million. Patel has been criminally charged with wire fraud in the case.

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However, not all agree Pennant will prevail. Vasu Srinivasan of Thomas USAF told us, “”You don’t get to sue the Treasury because someone gave you a counterfeit $ 100 bill.”