Hiren Patel is the former CEO of the largest Indian American-owned bank in the US.
By The American Bazaar Staff
WASHINGTON, DC: An ugly legal battle is shaping up between three prominent desi entrepreneurs – Hiren Patel, the former CEO and founder of the largest Indian American bank in the US, the National Republic Bank of Chicago, Indianapolis-based hotel owner and operator Bharat Patel, and one of the principals of the Uniondale, New York-based Navika Capital Group LLC, Naveen Shah.
Hiren Patel, whom regulators removed in July as CEO of the bank, is the target of new allegations by Bharat Patel that he’s conspiring to seize hotel properties in debt to the bank he used to run, reported Crain’s Chicago Business. Shah is involved in that conspiracy too, the allegations say, as he was privy to confidential information as Navika had been in discussions earlier this year to purchase in some of the hotels owned by Bharat Patel.
Hiren Patel and Navika instead now are trying to purchase the bank’s loans to the hotel ventures, according to the September 22 filing, said the Crain’s report.
The allegations say Hiren Patel and Navika want to own the properties of Bharat Patel, seven of which are in Chapter 11 bankruptcy and attempting to reorganize.
A U.S. Bankruptcy Court judge in Indianapolis late last month granted Bharat Patel’s motion for his lawyers to question Hiren Patel and Navika principals about their dealings with each other and their plans regarding the hotels in Chapter 11. Those examinations are expected to occur this month.
The allegations are the latest twist in a highly unusual series of events that have toppled National Republic Bank from the ranks of Crain’s list of most profitable banks in Chicago as recently as 2011 to one now at risk of failing. The bank, one of the largest hotel lenders in the U.S., suffered a $24 million net loss on $954 million in assets as of June 30.
The U.S. Office of the Comptroller of the Currency removed Hiren Patel, who’s owned the bank since 1984, as CEO in a July 2 consent order that gave little insight into the reasons for the sudden ouster. In the order, he was given 24 hours to relinquish all bank property and was barred from accessing the bank’s offices and systems, said Crain’s.
Bharat Patel’s businesses account for about $167 million in loans, nearly a quarter of National Republic Bank’s total loans. About $115 million of that is tied up in the properties in Chapter 11, which are sprinkled all over the country. Bharat Patel’s ventures have filed reorganization plans that would force the bank to take about an $11 million hit on the value of the loans.
The allegations says Bharat Patel “only recently learned that NRB intends to auction off its loans to debtor,” according to the court filing supporting his motion to question Hiren Patel and the Navika principals. “Upon information and belief, Navika has bid on the loans to debtor and its affiliates and has used confidential information — which it has shared with Hiren Patel — to do so.”
“Debtor believes that since its negotiations with Navika terminated, Navika has shared debtor’s confidential information with Hiren Patel so that he and Navika could interfere with debtor’s reorganization process and submit a bid for NRB’s loans to debtor and its affiliates, with the ultimate goal of obtaining title to debtor’s assets and thwarting its reorganization,” the filing stated.
Previous to the $24 million loss in the first half of this year, National Republic suffered net losses of $45 million and $40 million in 2013 and 2012, respectively. In the July order, the OCC declared the bank undercapitalized and in need of emergency restoration.
Hiren Patel remains the 100 percent owner of the bank, and it it’s sold without being seized by the FDIC, and the equity retains any value, he would receive the proceeds.
If it doesn’t survive, National Republic will be the fourth and last local Indian American-owned bank to fail since 2009. The largest, Mutual Bank of Harvey, failed in 2009. Regulators closed Des Plaines-based All American Bank in 2011 and Wilmette-based Premier Bank in 2012.
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Hiren Patel the smartest man in an empty room.
Hiren Patel the smartest man in an empty room.