Former SBA Administrator Hector Barreto Sentenced to 20 Months in Prison for Embezzlement Fraud

January 12, 2024

Delaney Sexton
Contributing Editor

Fraud Friday – Former SBA Administrator Barreto Sentenced to 20 Months in Prison For Embezzlement Fraud of Underprivileged Youth Programs

“You all were rising stars in your respective communities – and it’s a sad day,” Judge Pullman tells Hector Barreto and his co-defendant. Calling them “poster children for all that’s good about this country. It’s actually hard to sentence you.”

Barreto’s victim wasn’t as kind, calling them a bunch of “lying thieves.”

Yesterday, the U.S. Attorney’s Office announced that Hector Barreto, SBA Administrator (2001-2006), will be jailed for almost two years and ordered to pay over $1 million in restitution and fines.

Barreto was Chairman and operated the Latino Coalition Foundation, a charitable and tax-exempt organization. Barreto also operated the Hispanic Business Roundtable Institute, a domestic nonprofit organization. It was stated that Barreto controlled the bank accounts of both organizations.

Together, Barreto and his co-defendant, Miguel Gutierrez, solicited donations that were intended to form an apprenticeship program that would help provide training and mentorship to young workers and pair them with participating employers in trade-skills-based businesses. Dr. George Rapier agreed to donate $1.35 million over five years to support the program. Of the $1.35 million, Dr. Rapier donated $850,000 before the scheme was revealed. While a small portion was used as intended, 88% of the funds were used for Barreto’s and Gutierrez’s personal benefit.

Upon receipt of the first $250,000 of Dr. Rapier’s donation, the Latino Coalition Foundation (LCF) wired $100,000 to another individual. That individual then wired $50,000 each to Barreto and Gutierrez. LCF also made credit card payments and other payments with the funds.

The Wells Fargo Foundation was also defrauded by Gutierrez and Barreto. After donating $250,000 which was intended to support a matchmaking program that would be helping Hispanic businesses, the donation was used for Gutierrez’s and Barreto’s personal expenses. This included credit card expenses, football tickets, food and drinks, and more.

In Hector Barreto’s sentencing memorandum, it was asserted that “This is assuredly not a cynical case where a defendant facing sentencing suddenly becomes a model citizen. The simple fact is that throughout his life, Hector Barreto has always – of his own accord – always striven to help others find success in life,” (p. 36). Explaining the impact of the criminal proceedings that have taken place, the sentencing memorandum continues, “Mr. Barreto’s career as a nationally respected leader and champion for the less fortunate is essentially over,” (pp. 36-37).

The defense acknowledges that Barreto caused a loss of over $300,000, but the time and services he dedicated to the non-profits while being “substantially undercompensated” as the CEO outweighs the losses he caused. In comparison to the average earnings of a CEO at a similarly situated non-profit, Barreto was undercompensated by at least $555,000 between 2017 and 2020.

In the government’s sentencing memorandum, they state that “The most egregious attempts at minimization and justifications are Barreto’s assertions that the ‘Non-Profits Were Not Harmed’,” (p. 9). The U.S. refuted this point saying “This is stunning minimization. The Defendant argues that his services to the “’non-profits’ were so valuable, he was owned [sic] the money he stole anyway,” according to the U.S. (p. 9).

Read our previous reporting:
Fraud Friday – Former Head of SBA Pleads Guilty to Fraud Charges During His Trial – April 21, 2023

Additional Sourcing:
San Antonio Express-News