13 Year Small Business Loan Fraud Scheme Sees 4 Loan Originators Jailed

Four Executives Sentenced for SBA Fraud Scheme Spanning 13 Years

DEC 17, 2021 | REPUBLISHED BY LIT: DEC 17, 2021

Four Indianapolis-area small business lending executives, all of whom worked for Banc-Serv Partners LLC (Banc-Serv) — a defunct lending service provider — were sentenced this month in the Southern District of Indiana for a 13-year conspiracy to defraud the Small Business Administration (SBA) in connection with its programs to guarantee loans made to small businesses.

Kerri Agee, 46, of Carmel, Banc-Serv’s former president, founder, and owner, was sentenced to 68 months in prison;

Kelly Isley, 41, of Westfield, Banc-Serv’s former chief operating officer, was sentenced to 57 months;

Chad Griffin, 48, of Carmel, Banc-Serv’s former chief marketing officer, was sentenced to 28 months;

and

Matthew Smith, 53, of Brownsburg, Banc-Serv’s co-founder and a former director of Bridge Business Bancorp, a lending institution that originated loans with Banc-Serv, was sentenced to 46 months.

One additional co-conspirator, Nicole Smith, 44, of Indianapolis, is scheduled to be sentenced on Jan. 7, 2022.

These defendants were convicted following a two-week jury trial in the U.S. District Court for the Southern District of Indiana for the defendants.

Agee, Isley, Griffin, and Nicole Smith were each convicted of one count of conspiracy to commit wire fraud affecting a financial institution.

Additionally, Agee was convicted of four counts of wire fraud affecting a financial institution, and Isley and Nicole Smith were convicted of two counts of wire fraud affecting a financial institution. Matthew Smith was convicted of one count of conspiracy to commit wire fraud.

According to court documents and the evidence produced at trial, the defendants fraudulently obtained SBA-guaranteed loans on behalf of their clients, knowing that the loans did not meet SBA’s guidelines and requirements for the guarantees.

The evidence at trial proved that from approximately 2004 until October 2017, the defendants helped originate SBA loans through Banc-Serv on behalf of various financial institutions and other lenders. On multiple occasions, they fraudulently obtained SBA guarantees for loans they knew to be ineligible.

They did so by, among other things, knowingly misrepresenting what the loans would be used for, concealing disqualifying facts about the borrowers, and unlawfully diverting previously denied loan applications into expedited approval channels at the SBA. When the fraudulently guaranteed loans defaulted, the defendants caused the submission of reimbursement requests to the SBA to purchase the defaulted loans from investors and lending institutions, shifting a majority of the losses on the ineligible loans to the SBA.

“Fraud against SBA loan programs directly harms taxpayers and undermines the public’s faith in in important community programs.” said Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division. “The Criminal Division is committed to prosecuting the offenders who exploit these programs and abuse the public trust.”

“These sentences hold the defendants accountable for their egregious conduct to cheat a government-guaranteed loan program — by lying on loan documentation, concealing key information, and asking the government to pay for defaulted loans,” said Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation (FDIC). “We remain committed to working with our law enforcement partners and investigating those who seek to exploit federal programs and undermine the integrity of our nation’s banks.”

“Making false statements to fraudulently gain access to SBA program funds is deplorable and it is unconscionable that anyone would steal from a program intended to help hard working Americans keep their businesses afloat,” said Acting Special Agent in Charge Gregory Nelsen of FBI Indianapolis. “The FBI and our partners will continue to work diligently to identify and pursue those engaged in such illegal activity and ensure they are no longer in a position to defraud anyone.”

“Conspiring to defraud any SBA program is a blatant attempt to selfishly rob the nation’s diverse small businesses community from supports that assist them to grow and build our strong economy,” said Special Agent in Charge Sharon Johnson of the SBA Office of Inspector General’s (OIG) Central Region. “OIG remains committed to rooting out bad actors and protecting the integrity of SBA programs every day. I want to thank the Department of Justice and our law enforcement partners for their dedication and pursuit of justice.”

In addition to their prison sentences, all four defendants were ordered to pay restitution to the SBA. Agee and Isley were each ordered to pay $2,289,681, Griffin was ordered to pay $685,022, and Matthew Smith was ordered to pay 1,651,450.

The FDIC Office of Inspector General, FBI, and SBA-OIG investigated the case.

Assistant Chief William E. Johnston and Trial Attorneys Vasanth Sridharan and Brandon Burkart of the Criminal Division’s Fraud Section prosecuted the case. The Department of Housing and Urban Development Office of Inspector General also assisted in the investigation.

Topic(s):
Financial Fraud
Component(s):
Criminal Division
Criminal – Criminal Fraud Section
Press Release Number:
21-1264
Updated December 17, 2021

Jury Convicts Five Former Officers and Employees of Banc-Serv Partners in $5 Million Scheme to Defraud the Small Business Administration

AUG 5, 2021 | REPUBLISHED BY LIT: DEC 17, 2021

A federal jury convicted five former officers and employees of Banc-Serv Partners LLP (Banc-Serv) — a lending service provider — in a 13-year conspiracy to defraud the Small Business Administration (SBA) in connection with its programs to guarantee loans made to small businesses.

According to the evidence presented at trial, the defendants — Kerri Agee, 46, of Noblesville, Indiana, former president, chief executive officer and founder of Banc-Serv;

Kelly Isley, 40, of Westfield, Indiana, Banc-Serv’s former chief operating officer;

Nicole Smith, 44, of Indianapolis, Indiana, a former Banc-Serv employee; Chad Griffin, 48, of Carmel, Indiana, Banc-Serv’s former chief marketing officer;

and

Matthew Smith, 52, of Westfield, Indiana, Banc-Serv’s co-founder and a former director of a lending institution that originated loans with Banc-Serv — fraudulently obtained SBA-guaranteed loans on behalf of their clients, knowing that the loans did not meet SBA’s guidelines and requirements for the guarantees.

The evidence at trial proved that from approximately 2004 until October 2017, the defendants helped originate SBA loans on behalf of various financial institutions and other lenders and, on multiple occasions, fraudulently obtained guarantees for loans that the SBA had deemed ineligible.

They did so by, among other things, knowingly misrepresenting what the loans would be used for and unlawfully diverting previously denied loan applications into expedited approval channels at the SBA.

When the fraudulently guaranteed loans defaulted, the defendants caused the submission of the reimbursement requests to the SBA to purchase the defaulted loans from investors and lending institutions, thereby shifting some of the losses on the ineligible loans to the SBA.

The fraudulent loans presented at trial totaled approximately $5 million in guaranteed disbursements, which were not eligible for SBA guarantees.

Agee was convicted of one count of conspiracy to commit wire fraud affecting a financial institution and four counts of wire fraud affecting a financial institution.

Isley was convicted of one count of conspiracy to commit wire fraud affecting a financial institution and two counts of wire fraud affecting a financial institution. Nicole Smith was convicted of one count of conspiracy to commit wire fraud affecting a financial institution and two counts of wire fraud affecting a financial institution.

Griffin was convicted of one count of conspiracy to commit wire fraud affecting a financial institution.

Matthew Smith was convicted of one count of conspiracy to commit wire fraud.

The defendants convicted of conspiracy or fraud affecting a financial institution face a maximum sentence of 30 years in prison per count. The charge of conspiracy to commit wire fraud carries a maximum sentence of 20 years.

A federal district court judge will determine any sentence for each of these defendants after considering the U.S. Sentencing Guidelines and other statutory factors.

Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division; Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG); Special Agent in Charge Paul Keenan of the FBI Indianapolis Field Office; and Inspector General Hannibal “Mike” Ware of the Small Business Administration Office of Inspector General (SBA-OIG) made the announcement.

The FDIC-OIG, the FBI and the SBA-OIG investigated the case. This case is being prosecuted by Assistant Chief William E. Johnston and Trial Attorney Vasanth Sridharan of the Criminal Division’s Fraud Section. Trial Attorney Brandon Burkart provided significant assistance. The Department of Housing and Urban Development Office of Inspector General also assisted in the investigation.

The Criminal Division’s Fraud Section plays a pivotal role in the Justice Department’s fight against white collar crime around the country.

Component(s):
Criminal Division
Criminal – Criminal Fraud Section
Press Release Number:
21-744
Updated August 5, 2021