One man has pleaded guilty and another is negotiating the terms of his guilty plea after federal prosecutors and market regulators accused them of running a Ponzi scheme involving investments in nursing homes. (Google Maps)
CHICAGO — The bookkeeper of a Skokie-based healthcare firm has admitted that the company operated as a Ponzi scheme that routinely misappropriated investor funds and fraudulently diverted investment proceeds.
Erez Baver pleaded guilty to one count of wire fraud last month in federal court in Chicago and agreed to cooperate with prosecutors, who have charged his former boss, Zvi Feiner, with 10 counts of wire fraud.
Feiner, 51, and Baver, 42, devised a scheme to defraud investors in a series of limited liability companies under the umbrella of FNR Healthcare LLC, according to his plea agreement.
Based at 8170 McCormick Blvd., the firm was founded in 2007 and was dissolved involuntarily shortly after the indictment charging Feiner and Baver was unsealed, according to the Illinois Secretary of State’s Office.
Baver admitted in the plea agreement that he and Feiner misled investors about the cost of the properties they were buying — usually nursing homes or assisted living facilities — then used the extra money to make Ponzi-type payments to investors in their other LLCs.
Authorities said Feiner used his position as an Orthodox Jewish rabbi in high esteem on Chicago’s North Side and in the North Shore suburbs to solicit investments in the LLCs, and both he and Baver targeted the Orthodox community for their fraudulent scheme. According to his website, Feiner is the founder and spiritual advisor of a Skokie congregation and former president of a Jewish elementary school in Chicago.
Related: North Shore Rabbi Ran $22M Nursing Home Ponzi Scheme: Prosecutors
Feiner would also “routinely” sell off the investment properties without the knowledge of investors and misappropriate the proceeds to which they were entitled, and Baver would receive “commissions” whenever LLCs were sold.
“Baver had differing levels of knowledge about the sales, the information provided to investors, and the misappropriations of funds for each of the various LLCs’ facilities,” his agreement said. “In order to fraudulently conceal these sales and their misappropriation of sales proceeds, Baver and Feiner continued for months after the LLCs’ facilities had been sold to make purported distribution payments to investors and to provide investors with fraudulent Schedule K-1 tax documents falsely reflecting the purported distributions of income paid to investors by the LLCs.”
A federal wire fraud conviction carries a maximum sentence of 20 years in prison. According to Baver’s plea agreement, the sentencing guidelines for his offense range from about eight to 10 years in prison. But if federal prosecutors determine that Baver has fully cooperated with them, including potentially providing testimony in other cases, they agreed to recommend a sentence of less than five and a half years. A sentencing date has not yet been set.
Related: Nursing Home Pays $360,000 Judgment As Restitution To Government
Baver has agreed to make full restitution — “together with any jointly liable co-defendants” — of an amount determined at sentencing, which the government currently estimates at more than $14.5 million, according to the plea agreement. He also agreed to forfeit $3.76 million in proceeds that can be traced to the wire fraud he admitted.
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According to a July status report in Feiner’s case, prosecutors and Feiner’s attorney, Harold Garfinkel, had been hopeful that they would be ready to schedule a hearing for him to plead guilty, but they still needed time to determine the applicable losses in the case.
In another status report filed Wednesday, Garfinkel said he needed at least another 60 days to “resolve certain pending questions about the loss amount.”
The next status hearing on his case has been set for Jan. 31.
