December 27, 2019
By Caity Witucki
Contributing Editor, Fraud Friday
Fraud Friday– Pennsylvania Loan Officer Pleads Guilty to over $3 Million in Loan Fraud
According to the SBA OIG semiannual report, which was released on October 30, 2019, an SBA loan officer has pleaded guilty to over $3 million in bank fraud. He has been sentenced to 18 months of incarceration to be followed by 3 years of supervised release. He has also been ordered to pay $2,459,150 in restitution.
The OIG report states that the loan officer conspired with a client to obtain loans from two banks under false pretenses. The loan officer and his client submitted loan requests in the names of third parties when they knew that the client would control the proceeds. The loans consisted of a $1.76 million SBA-guaranteed loan funded by the first bank in July 2012 and a $2.183 million loan funded by the second bank in August 2013. The OIG report further alleges that the loan officer failed to disclose to both banks his extensive business relationship with his client, as well as the $60,000 loan and BMW he received from his client as payment for his services.
In addition, the report states that the loan officer admitted that he submitted a false “Request for Verification of Deposit” form on his client’s behalf. The client had requested a $5 million loan from a third bank for a separate business venture. Although the form showed that the client had maintained a checking account for the business with an average balance of $1.6 million, the man admitted that the account had been opened the day before he submitted the form and was funded via a single check from a different entity controlled by the client. The form was important because the third bank had determined that the business needed to show proof of equity or cash on hand of at least $1.38 million to qualify for an SBA guarantee. Although the third bank approved the $5 million loan, the loan was never funded because SBA determined that the loan did not qualify for the guarantee.
This investigation was worked jointly with the FHFA OIG and FDIC OIG.