Banc-Serv’s Kerri Agee, 4 others Arrested for $10 Million SBA Loan Fraud

Banc-Serv’s Kerri Agee, 4 others Arrested for $10 Million SBA Loan Fraud

March 22, 2019

By Bob Coleman
Editor, Coleman Report

Download the Indictment

  • One of the Biggest SBA Loan Fraud Scandals in Years Rocks Industry
  • Industry’s Largest SBA Loan Service Provider Accused of Cheating the Federal Government of over $10 Million
  • Largest Number of Individual Indictments in SBA Loan Fraud History from one firm at 5
  • Kerri Agee, and several co-defendants, woken up out of bed and arrested in pre-dawn FBI guns-drawn raid this morning says Tipster

Says the Department of Justice;

  • $10 Million in taxpayer funds ripped off in ineligible guaranty SBA lender repayments
  • Banc-Serv lied on guaranty applications to get ineligible SBA borrowers approved
  • Banc-Serv lied on purchase demand kits to get SBA loan guaranties paid by the federal government to lenders
  • 13-year fraud snags 5 former employees, impending jail time and careers ruined
  • Former NAGGL board member and NAGGL premium event sponsor Kerri Agee arrested and charged with 11 counts of loan fraud
  • Kerri Agee charged with making false statements in SBA loan-guarantee applications and purchase requests
  • Newtek tells Coleman Report the arrests have no material financial impact on operations

Former Banc-Serv Employees Arrested this morning:

  • Kerri Agee, 43, Co-Founder and CEO
  • Kelly Isley, 38, COO
  • Chad Griffin, 46, Marketing Officer
  • Nicole Smith-Kelso, 46, “employee”
  • Matt Smith, 50, Co-Founder and ex-husband of Kerri Agee

Says the DOJ;

“For the past 15 years the defendants helped originate SBA loans on behalf of various financial institutions. On multiple occasions, the defendants fraudulently obtained guarantees for loans that the SBA deemed ineligible, the indictment alleges. The indictment also alleges that the defendants hid signs of ineligibility from the SBA by knowingly misrepresenting the use of SBA loan proceeds and unlawfully diverting previously denied loan applications into expedited approval channels.

“Matthew Smith left Banc-Serv in or around the end of 2005, and he founded and became the managing director of a non-bank lending company. According to the indictment, Smith knowingly caused false and fraudulent loan applications that were prepared by Banc-Serv employees and guarantee requests to be transmitted to the SBA.

“The indictment further alleges that when a fraudulently guaranteed loan defaulted, the defendants caused other Banc-Serv employees to transmit requests to the SBA to purchase the defaulted loans from investors and lending institutions, thereby shifting losses on the ineligible loans to the SBA.

Coleman Report requested comments from Newtek, the “parent” company of banc-serv. and NAGGL. NAGGL didn’t respond.

Here is Newtek’s statement which was provided within the hour to the Coleman Report.

Newtek Business Services learned today that five former employees of its portfolio company ADR Partners, LLC dba banc-serv Partners, LLC , were taken into custody in connection with the previously disclosed federal investigation of what the Company believes to be pre-acquisition conduct of certain former banc-serv employees. As previously disclosed, subsequent to the Company closing on its $5.4 million investment in banc-serv, banc-serv was served with a search warrant by the Federal Bureau of Investigation at banc-serv offices in Westfield, Indiana. Banc-serv has cooperated fully with the authorities during the investigation.

Moreover, following the execution of the FBI search warrant, outside counsel was retained to conduct an investigation and as a result of that investigation, the Company believes that the alleged conduct pre-dated the Company’s investment in banc-serv. As of December 31, 2018, the fair valuation of banc-serv was $0.00 and presently, banc-serv has no employees.

Beginning in 2018, banc-serv’s customers were provided with the opportunity of contracting the services of another lender service provider portfolio company of the Company. As of March 15, 2019, the majority of banc- serv’s active customers had availed themselves of this option. While the outcome of this situation cannot at this time be predicted with certainty, the Company does not expect that the matter will materially affect the Company’s financial condition or results of operations.

DOJ Press Release — Former Officers and Employees of Indiana Loan Packager and Servicer Charged in Alleged $10 Million Scheme to Defraud the Small Business Administration
March 22, 2019

Read Our Previous Reporting

Kerri Agee out of banc-serv
April 13, 2018

Newtek Forecasts Zero Earnings from banc-serv
November 3, 2017

Banc-Serv Retains Brent Ciurlino, Appoints Karen McHugh EVP
October 19, 2017

Uh Oh, FBI Raids Banc-serv Campus, Locks Doors
October 13, 2017

Newtek Stock Down 10%, Says FBI Executed Search Warrant on Banc-serv
October 13, 2017