October 26, 2018

By Bob Coleman
Editor, Fraud Friday

Fraud Friday — Collateral Conversion Leaves Lender Counting the Wrong Cows

Collateral conversion occurs when the borrower sells the small business lender’s collateral and pockets the cash.

And that is loan fraud.

Another all hat and no cattle Kentucky farmer Brian Shepperd promised to pledge 900 to 1700 head as collateral for a $1.5 million line of credit with Farm Credit Mid-America.

The problem is “the defendant sold most of his cattle without replacing them and without providing notice of the sale to FCMA,” says his plea agreement.

Paperwork supplied by the farmer “falsely and greatly inflated the numbers.”

To complete the fraud, he showed inspectors other farmer’s cattle claiming the herd as his own.

Brian pled guilty and has been released pending his February 2019 sentencing on the conditions that he not travel outside of Kentucky and does not open a new bank account or line of credit