Georgia Banks and Executives Implicated in Ponzi Scheme

Atlanta real estate developer Shi Shailendra is facing several lawsuits in which he allegedly influenced five Georgia banks, four collapsed state banks, and 12 current and former senior banking executives to collude with him in a $100 million Ponzi scheme.

The named defendants in the seven lawsuits filed so far include RBC, UCB, Heritage Bank, Bank of the Ozarks and Gulf Coast Bank & Trust. Several of the bank’s top administrators as well as senior executives at the failed Park Ave Bank, Enterprise Bank, Bank of Barnesville and Colonial Bank have also been implicated in the separate lawsuits.

According to business litigation law firm Isenberg & Hewitt’s (which is representing multiple investor partnerships and limited liability corporations) latest complaint filed in Superior Court of Fulton County, the banks, bank officers, Shailendra Group employees and the Shailendra family engaged in and intentionally permitted fraudulent and negligent misrepresentation, concealment and diversion of real estate investors funds into the Shailendra’s personal accounts. Shi Investments One is an investment partnership created in 2005 to purchase, develop and operate land development.

The lawsuit alleges that the banks allowed the Shailendra family free access to bank accounts of dozens of partnerships and entities, where they supposedly withdrew money from the accounts for their own personal use to purchase vacation homes. There were approximately 100 accounts that the family was permitted to open for nearly 30 days throughout the various banks, the lawsuit said. In this time, millions of dollars was transferred between the accounts before the account was closed and a new account was created at the same bank.

The lawsuit said the banks permitted more than 1,000 bounced checks to be shifted into the family’s personal account. These transfers purportedly occurred daily by having a Shailendra family member who did not need any type of verification to make a request for this action to take place.

“The facts in this case show the banks’ insatiability for the fees generated by the Shailendra business and the banks’ willingness to break the law, bend the rules and violate banking principles and regulations to get and keep the Shailendra business,” said Ryan Isenberg, of Isenberg & Hewitt.

Another action that the banks allegedly allowed was facilitating check kiting—the illegal act of taking advantage of the float to make use of nonexistent funds in a checking or other bank account. The lawsuit also claims the banks granted personal loans to Shailendra that were not owned by the family, but by other partnerships without their consent. When these loans defaulted after deposits were already made in the family’s personal account, the banks then colluded with each other to replace the defaulted loans with new loans in order for the banks to balance their books.

Carlene Kikugawa, a 30-year forensic accountant who works for Los Angeles-based SingerLewak, uncovered the alleged Shailendra scheme. “Shailendra, his sons, wife, lawyers, accountants and co-conspirators basically took the cash out of various entities and pocketed the money,” Kikugawa said. “Shailendra created real estate investment ‘partnerships’ in which Shailendra put in no capital of his own. Shailendra then obscured his strategy by assuring investors that he and his sons would manage the assets. When the market buckled, the Shailendras’ house of cards began collapsing under its own weight.”