Zvi Feiner, accused of defrauding Holocaust survivor, other investors settles Ponzi scheme charges
A Chicago rabbi and a business associate settled charges
they operated a Ponzi scheme that triggered a $146 million default, the biggest
ever for a federally insured loan program for nursing homes. Still at issue is
how much the rabbi, Zvi Feiner, will pay.
Feiner, Erez Baver and their Skokie firm, FNR Healthcare,
were accused by the Securities & Exchange Commission of defrauding an
elderly Holocaust survivor and other members of Chicago’s Orthodox Jewish
community. They siphoned off at least $11.5 million raised from 62 or more
investors to buy nursing homes and assisted-living facilities throughout the
Midwest, according to a complaint filed Sept. 19 in federal court here.
Feiner, 49, is an ordained Orthodox rabbi and sole owner of
FNR. Without telling investors in limited liability companies, according to the
complaint, he sold facilities owned by other LLCs and used at least $9 million
in proceeds to pay other investors and lenders. Baver, 39, is FNR’s executive
vice president. He and his company, Cedarbrook Management, received more than
$2.5 million for personal use, the filing said.
While Baver and Cedarbrook have agreed to pay back about
$2.25 million and a civil penalty to be determined, Feiner and his attorney are
negotiating a figure. "It's going to be a big number," said Ariel
Weissberg, a Chicago attorney representing Feiner and FNR. Whatever it is,
Weissberg added, "he won't be able to satisfy it because he doesn't have
the financial resources."
Baver’s attorney, Stephen Rosenfeld of McDonald Hopkins’
Chicago office, said he would check with his client before commenting.
Starting in 2010, Feiner solicited funding for 20 LLCs
including four cited in the SEC complaint. One of those four, Rosewood Care
Centers, operator of a dozen nursing homes and an assisted-living facility in
Illinois and St. Louis, was seized last year by the U.S. Department of Housing
& Urban Development after defaulting on HUD's $146 million loan.
In August, a federal administrative law judge approved a
settlement requiring Feiner to pay $965,678 for failing to file three years of
audited financial reports. The government last month told the federal judge
overseeing the receivership that it had selected a buyer, which it didn’t name,
for Rosewood, the New York Times reported.
The SEC named Cedarbrook and Netzach Investments, a Feiner
family investment company, as “relief” defendants. Feiner took at least $3
million for personal use, while Netzach diverted $6 million, according to the
complaint. The settlement is subject to court approval.
Feiner settled two civil suits, even though one ended in a
judgment in his favor, Weissberg said. "It was the right thing to
do," he explained. "In the Jewish Orthodox community, that's what we
aim for. . . .There's a higher authority that needs to be answered."
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