Saratoga County

Saratoga Springs bank sues operators of Golden Corral restaurants over Paycheck Protection loans



A Saratoga Springs bank is suing 10 companies and two of their shareholders to recover nearly $2 million given out through PPP loans.

Adirondack Trust Company charges that the two misused proceeds of the funds loaned through the federal Payroll Protection Program to 10 of their corporate entities. They operate the Saratoga Springs Comfort Inn and Suites and, as franchisees, operate eight Golden Corral restaurants in New York and New Jersey, including those in Colonie, Queensbury and Wilton.

The PPP was one of the key parts of the federal relief and stimulus packages approved on an urgent basis this past spring as the COVID-19 pandemic paralyzed the economy and squeezed some business owners to the brink of failure. The program offered qualifying companies low-interest loans that would be forgiven altogether if the borrowers met conditions including job retention.

The pair are Niral A. Patel and Nirmala A. Patel, residents of Saratoga County and Schenectady County, respectively. The legal paperwork identifies Nirmala as Niral’s mother, and indicates both are shareholders in the 10 corporate entities that received loans. The lawsuit names the 10 as corporate defendants, and also indicates that Niral is an officer in each.

Adirondack seeks to recoup the nearly $2 million it disbursed to the defendants, plus interest, attorney fees and legal costs.

The lawsuit was filed Monday in State Supreme Court, Saratoga County. It makes the following statements and allegations:

  • The corporate defendants applied for PPP loans in April. Niral certified that the proceeds would be used in compliance with PPP rules. Between April 10 and 13, Adirondack entered into 10 promissory notes with the corporate defendants and disbursed $1,979,600 to them.
  • The loans ranged from $25,100 to $357,900; they carried a 1 percent annual interest rate and were to be repaid in 17 monthly installments starting Nov. 10.
  • The corporate defendants failed to use the PPP loan proceeds for permissible expenses such as payroll costs, mortgage interest, lease payments and utility payments.
  • The Patels used the proceeds for personal expenses and attempted to conceal this use and shield the proceeds from collection by Adirondack through a series of transfers among their various accounts.
  • Niral controls Nirmala’s personal checking account by virtue of a power of attorney granted in 2014.
  • Niral signed each of the PPP notes on behalf of each of the corporations and deposited the checks in the corporate defendants’ Adirondack checking accounts starting April 17.
  • Niral then caused nine of the corporate defendants to transfer $1.924 million to Nirmala’s personal Adirondack checking account May 7; on May 5, her balance in that account was just $5,926.15.
  • Nirmala then paid more than $17,000 on her residential mortgage loan (also through Adirondack), funneled $26,000 to Niral’s personal checking account, and transferred $102,000 to the tenth corporate defendant, which had received the smallest PPP loan — $25,100.
  • From May 7 to Oct. 5, $493,500 was transferred from the accounts of one corporation to Nirmala’s personal checking account and $649,550 from Nirmala’s account back to the same corporation’s accounts, constituting an improper funneling of money to that corporate defendant.
  • The corporate defendants and/or the Patels have in excess of $20 million in known liabilities. This includes a $10 million mortgage foreclosure action in Saratoga County; 80 federal and state tax liens and warrants totaling more than $6.6 million; and a January court action by another bank in a Suffolk County court seeking $2.53 million outstanding on a $2.85 million promissory note.
  • The corporate defendants’ PPP loans are not eligible for forgiveness because the funds have not been used for payroll or other permissible purposes. Therefore, each loan is in default.
  • The Golden Corrals were shut down March 18 with most other public places to slow the spread of COVID-19. The restaurants are no longer a going business — Niral said in an affidavit in the Suffolk County action that he has no intention of reopening the restaurants as Golden Corral franchises.
  • Because of all this, Adirondack believes the prospect of the loans being repaid is impaired.

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