Federal agents arrested the owner of a Southwest Baltimore industrial park yesterday on charges that he tried to solve his growing financial troubles early last year by torching his property and filing a bogus $3 million insurance claim.
Mahendra H. "Mike" Shah, 58, of Ellicott City was apprehended a day after a federal grand jury charged him in a 20-count indictment with arson, money laundering, wire fraud and other offenses.
The indictment, unsealed yesterday in U.S. District Court in Baltimore, alleges that Shah collected more than $250,000 from a series of fraudulent insurance claims filed as he was struggling to meet other financial obligations in 1999 and 2000.
The Jan. 6, 2001, arson that destroyed part of Shah Industrial Park in the 600 block of S. Monroe St. was set two days before Shah's insurance company planned to cancel his policy, Maryland U.S. Attorney Thomas M. DiBiagio said.
"That is a complete red flag that something was amiss here," DiBiagio said.
Shah's $3 million claim was rejected by the insurance company.
The six-alarm fire roared through a two-story brick warehouse and burned for nearly 12 hours before city firefighters brought it under control.
Flames fed by a ruptured natural-gas line leapt above the rooflines of surrounding rowhouses and forced the evacuation of more than 20 residents from neighboring homes.
Investigators quickly identified the fire as a potential arson, in part because of the timing and because they could identify two points of origin for the fire as well as traces of an accelerant used to fuel the flames, authorities said.
Working with agents from the Internal Revenue Service's criminal division and the insurance company, Travelers Indemnity Co., federal authorities identified a series of fraudulent claims allegedly made by Shah in the months leading to the fire last year, court records show.
Claiming water and property damage, Shah filed claims ranging from $5,000 to $80,000 between April 1999 and the end of 2000, the indictment charges.
Those claims were supported by false invoices from home repair companies or fake estimates for work needed at the property, the indictment alleges.
The insurance claims came at a time when Shah was facing financial troubles. He stopped making his monthly $4,000 mortgage payments on the industrial property in February 1996, according to court records.
In April 2000, a mortgage-servicing company had notified Shah that it planned to foreclose on the mortgage unless the balance of more than $373,000 was paid in full within a month, records show.
Shah made no additional payments, the indictment says.
Shah, arrested by agents from the Bureau of Alcohol, Tobacco and Firearms early yesterday, had an initial appearance late in the day before U.S. Magistrate Judge Beth P. Gesner. He did not enter a plea, but acknowledged that he understood the charges against him.
Gesner ordered Shah jailed until a detention hearing tomorrow after Assistant U.S. Attorney Jacabed Rodriguez-Cross said that agents had conducted four large-scale searches during the day and needed time to study the evidence that was collected to better determine whether Shah poses a flight risk or a danger to the community.
Shah is charged in the indictment with using fire to commit a felony - a federal statute not often invoked in white-collar criminal cases, but one that could bring a steep sentence if he is convicted because it carries a mandatory minimum term of 10 years.