by Howard Haykin

Zvi Feiner, a nursing home owner and Orthodox rabbi, used his position as a well-known leader in Chicago’s Orthodox Jewish community to defraud 62 investors out of more than $10 million – that according to the Securities and Exchange Commission (SEC).

Feiner, along with Erez Baver, a nursing home executive, perpetrated the scheme by telling private investors their funds would be used to purchase, own and operate nursing homes and assisted living facilities throughout the Midwest. Feiner and Baver promised these "low-risk" investments would generate high returns.

While some of the investor funds were used to purchase facilities, Feiner and Baver frequently misappropriated funds for various purposes, including: (i) to pay promised distributions to investors in other investment companies (Ponzi-like scheme); (ii) to support other struggling facilities; (iii) to pay back loans taken out on other facilities; and, (iv) for their own personal use.

For the record, this wasn’t Feiner’s first brush with questionable investments. Several months earlier, Feiner and his business associates defaulted on a $146 million loan backed by the Department of Housing and Urban Development (HUD) – a record default for this government program that supports financing for senior housing and care properties.

AVOIDING AFFINITY FRAUDS.    Affinity fraud refers to investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups. They often enlist respected community or religious leaders from within the group to spread the word about the scheme by convincing those people that a fraudulent investment is legitimate and worthwhile. In this case, the fraudster was a respected leader of the religious community.

While Investing always involves some degree of risk, the SEC recommends that investors can avoid affinity and other scams by …

[For further details, click on these SEC releases … 9/20/19 Litigation Release,  9/19/19 Complaint, 7/6/20 Press Release.]