Bankrupt Borrower Files False Claims Act Lawsuit against Lending Bank for SBA 504 Loan Loss


October 4, 2013

By Bob Coleman
Editor, Coleman Report

FederalFalseClaimsLogoBLUEA hotel owner who received a SBA 504 loan is suing the bank as a whistle blower under the Federal False Claims Act.

The borrower says the bank made false statements to SBA when it certified there were no material changes in the borrower’s financial condition and the borrower was not in default.

After SBA funded the $2 million debenture, “the bank then forced [the borrower] into bankruptcy,” says the whistle blower.

Just another disgruntled borrower lawsuit? Not so fast. The US Attorney’s office is joining the lawsuit against the bank.

The lawsuit was filed under the qui tam, or whistleblower provisions of the False Claims Act, which provides an opportunity for private parties to bring a lawsuit on behalf of the United States if they have some knowledge of fraud committed against the government. The private parties are entitled to receive a share of any funds recovered through the lawsuit. The False Claims Act authorizes the United States to intervene in such a lawsuit and take over primary responsibility for litigating it.

Read the plaintiff’s press release here.

Read the 28 page complaint here.