NC man arrested in Ponzi scheme defrauded people in the Indian community, FBI says

A former Chapel Hill transportation engineer was arrested Tuesday on 23 charges tied to an investment scam known as a “Ponzi scheme,” according to the U.S. Department of Justice.

Kumar Arun Neppalli, 56, of Cary, is charged with 17 counts of wire fraud and six counts of conducting transactions in criminally derived property, according to a news release. He is expected to go to trial later this year and could face up to 20 years in prison if convicted.

Neppalli, who was hired in 2000 as Chapel Hill’s traffic engineer, abruptly resigned as the town’s traffic engineering manager on Nov. 1, 2021, after filing for Chapter 7 bankruptcy that October.

Then-Town Manager Maurice Jones, who resigned from his job in December, told The News & Observer after the allegations surfaced that the town was taking them seriously but did not have evidence that Neppalli used his position to unduly influence development projects.

On Tuesday, town spokesman Ran Northam said in an email that staff did not find any irregularities regarding Neppalli’s work with the town.

Bilking investors

An N&O investigation revealed that Neppalli, a native of India, was accused of bilking 15 investors out of $1.9 million in business loans that he acquired through his connections with the Triangle’s Indian community.

Four investors who spoke with The N&O said they knew Neppalli through mutual friends or state and national Indian cultural groups.

Neppalli previously served as vice president and president of the Triangle Area Telugu Association, and as a former board member with the Hindu Society of North Carolina. He also served for 11 years as president of his Twin Oaks homeowners association in Cary.

Chapel Hill officials learned about the allegations in an October 2021 email from Srinivasa Yenduri, a Connecticut resident listed as a creditor in court documents. Yenduri, who did not respond to The N&O’s efforts to reach him, told court officials he gave Neppalli $150,000 for a “business loan,” documents showed.

Other investors spoke with The N&O on background only, citing a need to consult with their attorneys. Their investments ranged from $15,000 to $400,000 and were made over the last three years or longer, documents and interviews revealed.

The investors told The N&O that Neppalli touted his work-related development connections in promoting pending real estate deal with an unnamed local builder.

In some cases, the money represented his investors’ life savings, court documents showed.

According to the release, Neppalli asked his investors to give him money quickly — sometimes that day — and promised to return the principal investment along with a profit within a few months. He asked some of his investors not to talk about the pending deal with other people or referred them to a nondisclosure agreement, the release said.

“Our investigation shows Neppalli abused the trust and confidence placed in him by fellow Indian-American community members,” said Michael C. Scherck, FBI Acting Special Agent-in-Charge.

“He promised to invest their money in property. Instead, Neppalli used the funds to pay back other people he swindled as part of his scheme; now, multiple victims are left without their much-needed savings,” Scherck said in the release.

The federal indictment released Tuesday accused Neppalli of using ”his good standing within the Indian-American community in Cary” to defraud at least 12 victims or sets of victims, the news release stated.

Neppalli used the money from his investors “to pay back earlier investors who believed that he was returning their original investment and legitimate capital gains,” the release said.

“We are committed to protecting the investing public from financial schemes,” U.S. Attorney Michael Easley said in the release. “The U.S. Attorney’s Office is working closely with the FBI to identify, investigate, and pursue those who cheat people out of their hard-earned money.”

Bankruptcy filings

Bankruptcy documents filed in October 2021 with the U.S. District Court showed Neppalli owed nearly $2.5 million, including over $600,000 in debts with financial lenders, credit card providers and the Internal Revenue Service. He also claimed $2 million in assets, including homes in Cary and Apex that are still under a mortgage.

His bankruptcy attorney Joshua Bennett told The N&O in 2021 that Neppalli has made “little, if any money” from his investments.

“The narrative that you appear to be hearing, which is that he just — it sounds like they’re saying he just went and lied to people — I don’t think that’s the narrative that is going to come out in court,” Bennett said at the time.

Bennett’s office said he was out for the day when The N&O reached out Tuesday. He has not yet returned an email seeking comment on the latest development.

Several motions have since been filed in federal court to delay Neppali’s bankruptcy case, including a sixth motion that was filed Tuesday. Attorneys are seeking the delay to give law enforcement officials more time to complete their investigation, documents said.

The N&O reached out to multiple investors on Tuesday and learned they have hired an attorney to represent them in the bankruptcy case. However, they are not sure how much of the money will be recovered once the criminal and civil cases are completed, they said.

One investor, who lives in Charlotte, said he hopes law enforcement will find the money somewhere, because they did not see Neppalli living an extravagant life. The investor declined to speak on the record but said any settlement might earn them pennies on the dollar in return for their investments.

Court documents showed Neppalli’s earnings before retirement equaled roughly $14,000 a month, including rental income. His monthly bills were over $9,400, and he had less than $1,000 in various financial accounts. Neppalli told the courts that he expects to earn $4,831 a month in retirement.

The FBI’s Triangle Fraud Taskforce is continuing to investigate, the release said.

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