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Fraud Friday – Feds get Guilty Plea by Borrower for Lying to Banks, CDC and SBA

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March 21, 2014

by Bob Coleman
Editor, Coleman Report

FBILogoFor three counts. Bay Area neighborhood grocery store owner Nimer Massis failed to disclose three Citibank defaulted lines of credit to Mission National Bank, One California Bank and a CDC, Capital Access Group.

The following is from last year’s October indictment. Although a little dry, I’ve cleaned it up a bit, but left it mostly intact.

It is a meticulous chronology of how this fraudster ripped off the banks and SBA, and the establishes the facts to be presented by the prosecutor.

The Three Citibank Loans

On December 21, 2007 Massis applied for a $250,000 Citibank Business Installment Loan under the business entity “M. Massis Corporation .” The loan was approved the same day. In May 2008, the loan was in default.

On November 15, 2007, Massis applied for a $250,000 from Citibank under the business entity LLE, Inc. This loan was approved on December 26, 2007. In April 2008, Massis missed his first payment on the LLE loan

On February 21, 2008, Massis applied for a $200,000 Business Installment Loan from Citibank under the business entity “Right Way Market.” This loan was approved the following day. In June 2008, Massis missed his first payment on the Right Way Market loan.

In April 2009, Citibank send Massis three certified letters notifying him the loans were in default and collection proceedings were underway.

SBA Loan for Val-16 Market

In June 2008, Massis applied for a $250,000 SBA 7(a) loan for “working capital” for the Val-16 Market in San Francisco. The loan was approved on August 1, 2008. The lender was Mission National Bank. The loan application Massis completed required him to disclose “business indebtedness,” including “all outstanding installment debts, contracts, notes and mortgages payable.” Massis did not disclose any of the outstanding debt owed to Citibank.

Massis similarly failed to disclose the Citibank debt in a personal financial statement.

On August 8, 2008, before loan funds were disbursed, Massis signed an SBA Settlement sheet (SBA Form 1050) in which he attested that there had been “no substantial adverse changes to his financial condition, organization, operation or fixed assets since [the] application for the loan was filed or since the previous disbursement . . .” He signed the same attestation on September 12, 2008, before additional loan funds were disbursed. In both instances, Massis failed to disclose that the Citibank loans were in default.

Beginning in September 2008, Massis, missed the deadline for making payments for the SBA loan and began to make late payments. After making a payment on August 23, 2010, Massis stopped making payments for one year.

On January 31, 2011, the SBA liquidated the loan, paying Mission National Bank a total of $162,724. The loss to the SBA from its loan guarantee was $162,724, while Mission National Bank lost $52,695.

SBA 504 Loan for Point Richmond Market

In March 2009, Massis applied for $1.1 million in loans under the SBA 504 loan program. The stated purpose of the loan was “to purchase commercial land and building.” The loan was approved on April 29, 2009, for a combined total of $905,000. The senior lender was One California Bank, which lent $500,000. The junior lender was a CDC, Capital Access Group. Capital Access Group lent $405,000, which was 100% guaranteed by the SBA. According to the terms of the loan, Massis was expected to contribute $100,000 from his own resources, or from another source that would be subordinate to both the primary and secondary loans. The seller of the commercial property also agreed to accept a personal note from Massis for $100,000 of the purchase price.

In support of the 504 loan request for Point Richmond Market Massis submitted a personal financial statement to Capital Access Group that reflected $17,555,000 in assets and $8,044,364 in liabilities, for a total stated net worth of $9,510,636. Those liabilities consisted entirely of mortgages on real estate; they did not include the almost $642,000 in principal alone that was outstanding to Citibank, nor that by this date those loans were in default.

Also in support of the 504 loan request for Point Richmond Market, on or about April 29, 2009, Massis submitted a Small Business Loan Application to One California Bank. The loan application asked the borrower to disclose ..business indebtedness,” including “all outstanding installment debts, contracts, notes and mortgages payable.” Massis only disclosed his business debt associated with Mercantile Bank. He did not disclose any of the outstanding debt owed to Citibank, nor that the loans with Citibank were in default.

On May 11, 2009, before any funds were disbursed, Massis signed a Borrower and Operating Company Certification (SBA Form 2289), in which he attested, among other things, that since the date of the loan application there had “been no unremedied substantial adverse change in financial condition of Borrower or Operating Company or their ability to repay . . . the Note.” Massis further attested in this document that any “insolvency proceedings involving, or pending lawsuit against Borrower, Operating Company or any of their principals has been disclosed in writing to the CDC.”

Massis again failed to disclose that the Citibank loans were in default or that he had been contacted on April 20, 2009, by a law firm engaged by Citibank to commence an enforcement action against him and the other borrowers.

On February 8, 2011, the SBA liquidated the loan, repaying Capital Access Group $400,280.35. The loan to One California Bank remains in default as of the date of this Indictment.

SBA 7(a) Loan for Econo Market

In May 2009, Massis applied for an $800,000 SBA 7(a) loan for the Econo Market. The stated purposes of the loan were for “working capital” ($101,352.97) and other debt payment” ($698,647.03).

The lender was One California Bank.

The loan application asked the borrower to disclose “business indebtedness,” including 0all outstanding installment debts, contracts, notes and mortgages payable.” Massis only disclosed his business debt associated with Mercantile Bank for the refinance. He did not disclose any of the outstanding debt owed to Citibank, nor that the loans with Citibank were in default.

Also in support of this loan, Massis submitted a personal financial statement to OneCalifornia Bank that reflected $10, 193,150 in assets and $4,944,036 in liabilities, for a total net worth of $5,249, 114. The liabilities reflected in the financial statement submitted to One California Bank consisted almost entirely of mortgages on real estate ($4,888,036), and did not include almost $642,000 in principal that was outstanding to Citibank, nor that the Citibank loans were in default.

On September 17, 2009, before any funds were disbursed, Massis signed a Business Loan Agreement in which he attested that Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s financial condition as of the date of the statement, and there has been no material adverse change in Borrower’s financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements. On the same date, Massis signed a Borrower’s Certification stating that “there has been no adverse change in Borrower’s financial condition . . . since the date the Loan application was signed.

Massis again failed to disclose that the Citibank loans were in default or that he had been contacted on April 20, 2009, by a law firm engaged by Citibank to commence an enforcement action against him and the other borrowers.

The loan was funded on September 30, 2009. Massis began making late payments less than three months later, and stopped making regular payments in May 2010. Beginning in October 2010, Massis did not make a payment for approximately 17 months.

On November 15, 2010, the SBA liquidated the loan, paying One California Bank a total of $704,013.36. The loss to the SBA from its loan guarantee was approximately $686,784; One California Bank lost approximately $17,273.

Sentencing is set for July 23, 2014 where our perp faces the obligatory 30 years in jail and a million dollar fine.

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