Fraud Friday – Father & Son Plead Guilty in $1.7 Million USDA B&I Loan Fraud
February 14, 2014
By Bob Coleman
Editor, Coleman Report
A lender relying on a contractor’s certification of completion, disbursed $1.7 million to a father/son team, who coolly pocketed about $1.3 million for non-existent work.
Dad was president and the son was CFO of a company that purchased a manufacturing facility out of bankruptcy. (Oh, and that company was owned by Dad’s brother, but I digress.)
Anyway, a $6 million USDA business and industry loan guaranty funded the transaction. The new company was to employ 200 who would produce and distribute precision lighting equipment.
After the loan was approved says the FBI, “QC Manufacturing LLC was required to complete the work for which it was requesting payment before Country Bank would fund any portion of the $1.7 million allocation. Gregory and Terrance Yates admitted that they agreed with each other to use only their own construction company, Champion Development, and no subcontractors to perform the construction and improvements.
“By listing only their own construction company, the Yateses admitted they were able to falsely and substantially inflate the value of the labor or materials furnished by Champion Development, thereby drawing money from the USDA loan for work that was either never performed or was of lesser value than claimed on the contractor’s sworn statements provided to the bank. For example, Gregory Yates admitted he told employees of Champion Development to ‘simply spruce up’ the Casey facility to lower the cost of improvements.
“Terrance, in agreement with Gregory Yates, admitted that fraudulent sworn statements and affidavits, signed by Terrance, were submitted to the bank claiming that Champion Development had performed work and supplied materials. Based on these fraudulent statements, the bank disbursed $1.7 million to QC Manufacturing. Of the $1.7 million disbursed, more than $1.3 million was transferred from QC Manufacturing to Champion Development and then transferred to other accounts.”
The boys are free on bond pending their May sentencing date.