July 29, 2021

Delaney Sexton
Contributing Editor

Borrowers Take the Witness Stand on Day 3 banc-serv Fraud Trial

A borrower who owned a manufacturer of concrete masonry testified that $770,000 of her $1.2 million loan was disbursed as a check to the IRS for delinquent payroll taxes.

However the use of proceeds said around $191,000 would go to accounts payable and $618,000 would be delegated as working capital. She later defaulted on her loan. The borrower believes she had interactions with Kelly Isley, Chad Griffin, and Matt Smith, and Kerri Agee was copied on some of the emails regarding the loan. In the indictment, this borrower appears as “Loan to Borrower #5”.

Next up, the owner of a printing business. Over time he received four separate SBA loans.

His final loan was $35,000 to pay back taxes and working capital. During the Great Recession, he couldn’t pay payroll taxes, and his bookkeeper never paid taxes on time.

The original request said the SBA loan would pay past due payroll taxes, but the bank and banc-serv changed the use of proceeds to say it would provide working capital for accounts payable.

The government says the witness had a history of late payments and poor credit that should have prevented him from obtaining an SBA loan, but similar to the first borrower, he never reviewed the documents that he signed. He assumed all the documentation would be accurate and trusted his banker. The borrower eventually filed for bankruptcy. banc-serv helped with all four loans that the borrower applied for and received. In the indictment, this borrower appears as “Loan to Borrower #6”.

Finally, the last witness of the day owned a foundry company. He and his partner wanted a loan to refinance their debt, use for working capital, and use for business acquisition.

The loan originally stated their 50/50 shared ownership, but his partner had a prior history with a bad loan that caused the loan to be declined. The loan was then readjusted without him knowing so it would state that the ownership was 85/15. This loan was also denied due to the change of ownership occurring within a six-month period. Witness number six was never informed of the original loan declining, and he was not made aware of the changes in ownership that were doctored on the second loan application. The loan application was once again withdrawn, and it now stated that this borrower fully owned the business. They also renamed the business, but the date of the application was the same as the last loan application attempt. In the indictment, this borrower appears as “Loan to Borrower #3”.

In each of these witnesses’ testimonies, they said that paperwork and documentation were changed without them knowing or given permission. They testified their signatures would be replicated on a second or third loan application to achieve the goal of the original loan application. They were left in the dark when it came to the fraudulent activities going on, and they trusted that their lender filed all this paperwork accurately and legitimately.

Indictment