January 22, 2016
By Bob Coleman
Editor, Fraud Friday
Fraud Friday — Borrower Gets 6 Months Home Confinement for Lying to an SBA Lender
The fraud by Justin Johnson and his wife consists of two parts.
The couple was nailed when Penny Johnson answered “no” on line 16 of SBA Form 1919, “Will more than $10,000 of the loan proceeds be used for construction?” More than $10,000 of SBA 7(a) loan proceeds were used for construction.
The second part of the fraud, money laundering, occurred when the borrower represented it was buying equipment with the proceeds of a $160,000 SBA Express loan from Bank of the Prairie in Olathe, Kansas.
The borrower, Timberview Construction, owned by Penny Johnson was to purchase $63,000 of equipment from her husband’s company, J-Right, Inc.
The feds tracked the proceeds and determined the transaction was a sham and proceeds were used to pay off equipment debt, personal expenses and, of course, new construction.
“A review of the Johnson’s monthly bank statement from March 7, 2009 through April 7, 2009 reveals several purchases made using a debit card and checks which were not associated with the stated purpose of the SBA loan. Such purchases include those made at The Home Depot, Panera Bread, Walmart, Wendy’s, Preferred Pediatricians, Walgreens, Smokehouse Barbeque, DirecTV, and Long John Silver’s,” says the pleas agreement.
Justin received six months home detention and three years probation. Penny received three years probation. Each are assessed $53,000 in restitution.