North Shore Rabbi Ran $22M Nursing Home Ponzi Scheme: Prosecutors

SKOKIE, IL — Federal prosecutors say a North Shore rabbi targeted the Chicago area Orthodox Jewish community in a Ponzi scheme that cost its victims more than $22 million.

Zvi Feiner, 50, and Erez Baver, 40, both residents of Chicago's West Ridge neighborhood, each face federal fraud charges in connection with the operations of FNR Healthcare LLC between 2012 and 2017, according to an indictment filed under seal earlier this month.

Feiner was president and CEO of the company, which is based at 8170 McCormick Blvd., founded in 2007 and no longer in good standing, according to Illinois Secretary of State's Office. He pleaded not guilty to 10 counts of wire fraud last week.

Baver was its bookkeeper and executive vice president, according to the indictment, which charges him with a single count of wire fraud. He is due to have an opportunity to enter a plea Wednesday. Each count of wire fraud carries a maximum sentence of up to 20 years in prison. Neither man's listed attorney responded to a request for comment on their behalf Monday.

The criminal charges come just over two months after Feiner agreed to a consent judgment with the Securities and Exchange Commission. The federal financial regulators filed a civil complaint against both men in September 2019. Baver has already agreed to pay over $2.53 million, according to the agency.

"Feiner is an ordained Orthodox Jewish rabbi and was a well-regarded figure in the Orthodox Jewish community on Chicago’s north side and near north suburbs," SEC attorney Michael Foster alleged in the complaint. "As such, he exploited those relationships by soliciting members of the Orthodox Jewish community to invest in his scheme. Baver also solicited investors from this community."

Feiner is the founder and spiritual advisor of Bais Medrash Binyan Olam, a congregation that operates out of his building, according to his website. He has also served as president of Yeshiva Ohr Boruch Elementary School, according to his website. He was a founding principal of Wi-Fi Investment, where he "built an $80 million portfolio of syndicated real estate opportunities for high net worth investors," it says.

Prosecutors said Feiner created at least 15 limited liability companies under the FNR umbrella as investment vehicles to buy and manage one or more properties, usually assisted living facilities or nursing homes that would be managed by outside companies.

Feiner and Baver raised money for the LLCs by lying to investors about their profitability, then they misappropriated the money they raised, according to the indictment. The pair then paid out early investors with money later through the Ponzi scheme, using some of the money to acquire more health care facilities and some for their own person benefit, according to the indictment.

According to the indictment, Feiner would falsely claim to investors that he had invested his own money in the LLCs.

The two men raised money for a total of about 20 LLCs from 2010 onward, according to the SEC complaint. They would typically say the previous owners of the nursing homes and assisted living facilities had not maximized the revenue they could generate.

In addition to the fraud charges, prosecutors are seeking the forfeiture of $13.56 million from Feiner and $3.76 million from Baver.

They caused at least 75 investors to lose at least $22,781,096, according to the indictment.

Among the victims of his Ponzi scheme, according to civil court filings, were an elderly Holocaust survivor, a fellow rabbi and a group of teachers at a religious school whose savings it wiped out.

In 2018, Feiner's business defaulted on $146 million in government-backed loans on the Rosewood Care Centers chain in the biggest-ever mortgage default in the Housing and Urban Development program that insures nursing homes, the New York Times reported last year. His FNR firm stopped paying payments on the purchase just over a year after buying it in 2013, according to the Times, which reported health and safety problems developed at the for-profit nursing home chain's facilities as soon as Feiner's ownership group took over.

Feiner has also been sued at least four times in federal civil court by investors who allege he conspired to defraud them, with at least one of suits settled confidentially, according to court records. Separately, the Jewish Ecclesiastical Court of the Chicago Rabbinical Council ordered Feiner to pay $13.2 million to an investor in an arbitration ruling, and a civil case seeking to register that judgment remains pending in Cook County court.

Records show Feiner was arrested Tuesday on a warrant for the 10 counts of fraud and immediately released on his own recognizance following a telephone hearing with special conditions of bail, which remained sealed as of Monday.

Update: Nursing Home Ponzi Scheme VP Admits Guilt As CEO Negotiates Plea