BALLSTON SPA — The owner of several shuttered Golden Corral restaurants responded this week to allegations of PPP fraud with an affidavit from a forensic auditor who found no fraud.
The filing Thursday by an attorney for Niral Patel is the latest round in an ongoing battle between him and his longtime banking partner, Adirondack Trust Company, over nearly $2 million in Paycheck Protection Program loans extended to the Niral family for the 10 corporate entities that operated their restaurant chain and their hotel.
Adirondack last year froze the funds and in October filed a suit alleging that Patel didn’t use the PPP funds for the purposes outlined in the federal COVID relief measure provided to businesses in 2020, which offered low-interest loans that would be converted to grants if the recipient maintained the workforce.
The lawsuit seeks repayment of the $1.98 million loaned out, plus interest, attorney fees and legal costs.
Days later, Patel said he was stunned to read of the lawsuit in The Daily Gazette, and he denied the allegations. In December, his attorney filed a counterclaim against Adirondack seeking dismissal of the case and award of damages likely to exceed $10 million.
His counterclaim said, among other things, that the Patels hadn’t made off with the money — it was sitting in the Adirondack Trust Company account all along — and that Adirondack lacked authority to take action over PPP fraud, a power vested in the U.S. Small Business Administration.
The filing Thursday on Patel’s behalf includes an audio recording Patel made of a phone conversation before Adirondack filed its October 2020 lawsuit containing what his attorney identifies as the bank’s in-house counsel admitting that the bank had no proof of actual fraud pertaining to Patel and the alleged misuse of federal Paycheck Protection Program funds.
There’s also an affidavit from Saratoga Springs forensic accountant Stephen Ferraro stating that Adirondack’s allegations are inaccurate and based on incomplete analysis and flawed assumptions that are not supported by bank records. The money spent by the Patel family was for proper purposes, he wrote.
Patel’s attorney William Nolan states in a memorandum filed Thursday that the COVID pandemic disproportionately left minority-owned businesses struggling and says SBA strongly encouraged lenders to support them through PPP loans and fair-lending practice.
By crippling a struggling Indian-American business for allegedly violating terms of the PPP program, Adirondack is itself violating the intent of the PPP program, Nolan says.
Asked for a response Friday, Adirondack released a statement that did not directly address the assertions made in the Patel filings a day earlier. It said:
“The Adirondack Trust Company has had a long business relationship with Mr. Patel and his family, to whom the bank has extended millions of dollars in loans over many years. At Mr. Patel’s request, Adirondack Trust processed and submitted to the U.S. Small Business Administration applications for 10 Paycheck Protection Program loans for his businesses. Information subsequently came to our attention that Mr. Patel’s businesses might not be eligible for the Paycheck Protection Program. We consulted with the SBA and worked with Mr. Patel to address these matters, but despite our best efforts were unable to do so. Mr. Patel was treated, as all of our customers are treated, with consideration, courtesy and respect at all times.”
Patel five weeks ago told The Gazette that he is making progress toward getting back his operations back in business. In May he was approved for the largest single grant awarded in the Capital Region under the federal Restaurant Revitalization Fund program — $2.54 million — and in July was approved to buy back a Wilton property out of bankruptcy.
He hoped to reopen five of the eight Golden Corral restaurants he operated under franchise, including those in Colonie, Queensbury and Wilton, over the next several months.
But Patel acknowledged the hurdles he still faced, including raising capital, resolving the civil litigation with Adirondack and finding hundreds of employees in an extremely tight labor market.
In a news release Thursday, the Saratoga Springs resident said:
“Let me be clear, we are not letting the legal dispute with Adirondack Trust Company impede our plans to reopen our businesses, we are going to do everything we can to see justice prevail and bring back as many employees as possible.”
He also took a last swipe at Adirondack, which in June agreed to a $275,000 penalty to settle a state Department of Financial Services probe of higher interest rates charged to minority borrowers than to non-minorities on auto loans in 2016 and 2017.
The DFS probe was based on computer modeling, not actual loan records, which don’t specify race of borrower. And the rates were set by auto dealers that partnered with Adirondack, not by the bank itself. However, Adirondack was the lender.
“I will not be deterred by a bank that has a recent track record with the New York State Department of Financial Services of discriminating against minorities and is now trying to bully me out of my businesses,” Patel said in the news release.