Office of Inspector General Monthly Update - February 2008

Business Loan Programs

Colorado Office Manager Charged.

On December 17,
2007, the office manager for a plastic surgeon in
Denver, Colorado was charged in a 15-count criminal
complaint with five counts of forgery, five counts of
identity theft, three counts of theft, and two counts of
attempted theft. The complaint charges that she used
the plastic surgeon’s personal information and
signature stamp to fraudulently obtain two SBAguaranteed
Express Loans, totaling $150,000, without
his authorization. In addition, using the same scheme,
it is alleged that she obtained an $180,948 non-SBA
loan and applied for other loans, many of which were
never approved or disbursed. The office manager used
the majority of the loan proceeds for her personal
benefit. This case was initiated based on a referral
from an SBA lender.

Texas Businessman Pleads Guilty.

On January 30,
2008, a Texas businessman pled guilty to making a
false statement to obtain property or credit. He falsely
certified that he was “current” on all taxes in order to
obtain a $1,701,000 SBA-guaranteed business loan
from a Texas lender. He was sentenced to ten years
confinement; however, the sentence of confinement
was suspended and he was placed on community
supervision for ten years. He was also ordered to pay
restitution of $1,352,300 and perform 320 hours of
community service.

Delaware State Employee Pleads Guilty.

On February
5, 2008, an employee of the State of Delaware, Bureau
of Unclaimed Property, pled guilty to one count of
conspiracy to commit wire fraud, one count of
conspiracy to commit money laundering, and one
count of wire fraud. He and a co-conspirator were
previously charged for fraudulently obtaining
abandoned stock certificates from the Bureau of
Unclaimed Property, Delaware Department of
Finance. The co-conspirator then applied for a $309,000 SBA-guaranteed loan to purchase a tanning
franchise and used the funds derived from the
fraudulently obtained stock certificates for the required
equity injection. Judicial action against the coconspirator
is continuing. This case was based on a
referral from the lender. The OIG is investigating this
case jointly with the Federal Bureau of Investigation
(FBI) and the Internal Revenue Service (IRS).
Illinois Man Arrested. On February 17, 2008, an
Illinois man was arrested by the FBI and the
Merrillville Indiana Police Department. Along with
another individual, he was charged on September 25,
2007, in a previously sealed indictment in the
Southern District of Iowa, with one count of
conspiracy, six counts of wire fraud, and four counts
of mail fraud. The charges relate to a scheme to
induce a lender to approve three separate loans (one
SBA-guaranteed loan and two lender direct loans),
totaling more than $4 million, to purchase three gas
stations in Iowa. The indictment alleges that both men
enlisted “front” borrowers and provided the lender
with false and fraudulent documentation on behalf of
the borrowers in order to influence the approval of the
loans. The second individual was previously arrested
in relation to a separate indictment in the Northern
District of Illinois. The OIG is conducting this joint
investigation with the FBI.

Disaster Loan Program

President of Alabama Company Sentenced.

On
February 1, 2008, the president of an Alabama
aerospace company was sentenced to 63 months
confinement, 36 months probation, and $1.3 million in
restitution, which reflects the total amount by which
he defrauded the SBA, the IRS, and a fraternity where
he acted as trustee and treasurer. The president of the
aerospace company, who co-owned a private charter
plane company, obtained a $177,800 disaster loan for
economic injuries resulting from the September 11 World Trade Center terrorist attacks. After the loan
defaulted for non-payment, he produced four
fraudulent documents that indicated SBA had released
its liens against his personal and business properties
and sold two properties that were held as collateral on
the SBA disaster loan. As a result, he received
$92,526 that should have been paid to the SBA. In
addition, he embezzled almost $980,000 from the
fraternity and failed to pay required federal income
taxes. He is a retired Army Colonel and was
previously employed as an ROTC professor with
Auburn University. This case was initiated as a result
of a referral received from the Santa Anna Liquidation
Center. The OIG conducted this investigation jointly
with the IRS and the Auburn Police Department.
Mississippi Man Pleads Guilty. On February 21,
2008, an Ocean Springs, Mississippi man pled guilty
to one count of theft of government funds for
submitting a false Borrower’s Progress Certification to
the SBA in order to receive disbursements from a
$40,000 SBA loan. He admitted that he lied on the
form when he stated that he had used the first $10,000
of the loan to purchase household products. He also
received $6,352 in Hurricane Katrina disaster funds
from the Federal Emergency Management Agency.
The OIG is conducting this investigation jointly with
the FBI and the U.S. Postal Inspection Service.

Statutory/Regulatory/Policy Reviews

In an effort to proactively identify and correct
potential Agency inefficiency and management
problems at the onset of policy and regulatory
development, the OIG reviewed, cleared, and/or
provided comments, as appropriate, on 5 Agency
initiatives, including proposed legislation, SBA
Standard Operating Procedures, and Agency notices
containing directives to its employees.

This monthly update is produced by the SBA OIG,
Eric M. Thorson, Inspector General.
The OIG has established an e-mail address
(oig@sba.gov) that we encourage the public to use to
communicate with our office. We welcome your
comments concerning this update or other OIG
publications. To obtain copies of these documents
please contact:

Beverly Menier, SBA OIG
409 Third Street SW., 7th Floor
Washington, DC 20416
E-mail: OIG@SBA.GOV
Telephone number (202) 205-6586
FAX number (202) 205-7382
Many OIG reports can be found
on the Internet at:
http://www.sba.gov/IG/igreadingroom.html
If you are aware of suspected waste, fraud, or
abuse in any SBA program, please call the:
OIG FRAUD LINE at (202) 205-7151
or
TOLL-FREE at (800) 767-0385