BALLSTON SPA — A local family has filed a counterclaim against the Saratoga Springs bank that alleges they misused a small-business bailout loan provided to weather the COVID-19 crisis.
Adirondack Trust Company sued Nirmala A. Patel and her son Niral A. Patel in October to recover $1,979,600 in federal Payroll Protection Program funds disbursed to 10 of their corporate entities. They operate the Saratoga Springs Comfort Inn and Suites and, as franchisees, eight Golden Corral restaurants in New York and New Jersey, including those in Colonie, Queensbury and Wilton.
The bank alleged that the PPP money was shuffled between various accounts, including Nirmala’s personal checking account, and not used for the intended purpose: keeping the 10 companies afloat through the COVID crisis.
Later that month, on the Patels’ behalf, Albany law firm Nolan Heller Kauffman issued a statement denying the allegations contained in Adirondack’s Oct. 12 complaint in state Supreme Court, Saratoga County.
On Wednesday, attorney Justin Heller filed a counterclaim against Adirondack seeking dismissal of Adirondack’s lawsuit, the $1,979,600 that was seized (plus interest), and damages likely to exceed $10 million.
The counterclaim asserts as an affirmative defense that:
- Adirondack did not state a valid cause of action in its complaint.
- Adirondack lacks standing to bring action — the U.S. Small Business Administration is responsible for enforcing the PPP provisions of the CARES Act.
- Adirondack’s claims are barred partly or entirely by documentary evidence; doctrine of waiver; and doctrine of estoppel.
The counterclaim also asserts and alleges that:
- The Patels were harmed and continue to be harmed by Adirondack wrongly placing a hold Sept. 24 on the nearly $2 million in PPP loan proceeds and on other funds on deposit with Adirondack; they’ve suffered more than $10 million in damages as a result.
- The Patels have maintained records to account for each of their companies’ PPP loan proceeds and disbursements.
- Adirondack informed Niral Patel on Sept. 25 that it had frozen Nirmala’s deposit account in the amount of the original $1.979 million, effective Sept. 24; the bank subsequently told Niral it considered itself a partner to him and his mother, and was freezing the money for their protection.
- On Oct. 9, the Patels asked Adirondack for written notice of any alleged fraud or mishandling of PPP funds; the bank instead filed suit against them Oct. 16.
- The PPP defaults alleged by Adirondack are without merit because, among other reasons, COVID caused deep trouble for the Patels’ various businesses before the PPP loans were even approved, and those problems can’t now be called a new development that justifies calling in the loans.
- Unless the Patels immediately get full access to the money they deposited with Adirondack, their businesses will be forced to shut down permanently.
The attorneys who filed Adirondack’s claim against the Patels in October did not return a request Friday for comment on the counterclaim.
Heller and Niral Patel issued a statement Friday expanding on the counterclaim and the impact the Patels have suffered in the two months since filing of the original complaint.
“The underlying grounds for Adirondack Trust Co.’s claims are all based on flawed assumptions and mischaracterizations,” said Heller. “Among many other deficiencies, Adirondack Trust Co’s complaint glosses over the fact that, except for limited expenditures for payroll and other permitted uses, the funds at all times remained on deposit with the bank.”
Niral Patel said: “This lawsuit has taken an excruciating personal toll on my family and our reputation not to mention irreparable harm to our business’s good will and reputation in our community. … By no means did we do what Adirondack Trust Co. is alleging. We value all our business relationships with our customers and employees. We are an honest, hardworking family that was blindsided by the suit while reading the newspaper.”