The Securities and Exchange Commission (SEC) this week filed a lawsuit against the Chicago-area businessman at the center of a record-setting nursing home loan default, accusing the man and his company of defrauding investors and misappropriating funds.
The SEC alleged that Zvi Feiner, a nursing home owner and Orthodox rabbi, raised money from various investors with promises of substantial returns on specific skilled nursing and assisted living facilities — but instead used the cash for personal reasons and to support other faltering properties in his portfolio.
The suit also named Feiner’s business associate Erez Baver and multiple companies that Feiner controlled, including FNR Healthcare, LLC.
“From at least 2014 to 2017, Defendants Feiner and Baver operated a fraudulent scheme involving the misappropriation of proceeds raised through the offer and sale of membership interests in limited liability companies (LLCs) that would purchase, own, and sell nursing homes and assisted living facilities,” the SEC wrote in its suit, filed Thursday in the U.S. District Court for the Northern District of Illlinois.
In all, Feiner raised $10 million from 62 investors to support the various ownership companies, according to the SEC document. The government accused Feiner of using his position as a well-known leader in Chicago’s Orthodox Jewish community to help generate interest in his companies.
“As such, he exploited those relationships by soliciting members of the Orthodox Jewish community to invest in his scheme,” the SEC wrote. “Baver also solicited investors from this community.”
Baver and Feiner have already reached a deal to settle the case, Bloomberg Law reported, with Baver set to pay $2.25 million and Feiner still negotiating a final amount with the SEC. Under the settlement, the pair will not formally admit any wrongdoing, according to Bloomberg Law.
The lawsuit marks yet another milestone in the long-unwinding case of Feiner and his associates. Back in June, the New York Times reported that Rosewood Care Centers, an Illinois chain owned by a Feiner-led group of investors, defaulted on a $146 million loan backed by the Department of Housing and Urban Development — a record for HUD’s Section 232 program, which provides insurance for loans associated with senior housing and care properties.
A judge in August approved a nearly $1 million penalty against Feiner to settle allegations that he failed to file appropriate paperwork for the Rosewood Care Centers loans; Feiner also faces up to $20 million in unpaid vendor bills and dozens of personal injury lawsuits, according to a Times report on the penalty.