A Walnut Creek resident was sentenced to 63 months in prison on Wednesday in connection with a multi-million dollar investment fraud scheme, United States Attorney Melinda Haag announced. Along with three others, Lal Bhatia created fraudulent corporations that intended to borrow $160 million to finance fake construction projects.
Between June 2003 and April 2004, Bhatia and co-defendants Steven Eugene Shelton, Henri Berger and Marzban Mody set to defraud a company looking to build a convention hotel in Orlando, Fla. and a company that planed to build an aquarium entertainment complex in Houston, Texas. According to plea agreements, the scheme "was intended to defraud the two companies out of large sums of advance fees paid with no intent…to fund the requested commercial loans."
As the organizer of the fraudulent loan scheme, Bhati recruited Berger, Mody and Shelton to portray fictional individuals and invent a fictitious company called Sherwin & Noble Ltd., which was the purported source of the loan funding. Over several months, several fictitious names, including "Sir Richard Benson," portrayed by Berger, "Dr. Adrian Michaels," portrayed by Shelton and "Atul Verma," who was represented to be an individual involved in the processing of loan applications, were used to lure victims into paying advanced fees.
At a private Las Vegas club in November 2003, Bhatia introduced the prospective borrowers to Berger as "Sir Richard Benson," a wealthy businessman and owner of Sherwin & Noble, a London business with hundreds of millions of dollars in assets. At the meeting, they were also introduced to "Dr. Adrian Michaels," an individual who was employed to conduct due diligence on the borrower's applications on behalf of the lender, Sherwin & Noble. The prospective borrowers were then falsely informed that any advance fees they paid would be refunded with modest deductions for expenses if the loans were not funded.
To further cement their legitimacy as a corporation, the defendants created a glossy brochure that falsely reflected their financial status and a money transfer receipt that showed the transfer of $105 million to support the false representation that they had available funds to finance the loan.
According to the plea agreements, following the meetings in Las Vegas, the borrowers made three advance payments totaling $1,978,250. After the advance fees were paid, the defendants received calls from representatives of the borrowers asking when the loans would be funded. The defendants responded with false statements with the intent to lull the borrowers into believing the scheme was not fraudulent.
In addition to prison time, Bhatia was ordered to pay restitution of $1,987,250 while co-conspirator Shelton must pay $1,575,250 in restitution. Berger, 80, of Beverly Hills, was sentenced on June 21 to 1 day in prison, followed by three years supervised release and ordered to pay restitution of $1,987,250 for his plea of guilty to a wire fraud offense. Culver City resident Mody was sentenced on July 20 to three years probation for his plea of guilty to structuring monetary transactions to avoid reporting requirements.