Earlier this month David Faraj was sentenced to 61 months in prison for his participation in an $84 million dollar Small Business Administration (SBA) loan scheme.
According to the plea documents, between 2000 and 2005, Faraj obtained SBA guaranteed loans through the use of straw purchasers. He falsified documents to make it appear that the straw purchasers were credit worthy. Because he was a convicted felon, he was unable to obtain the SBA loans himself, and needed to use straw purchasers. Faraj admitted to using fraudulently obtain loans to purchase 17 properties. Additionally, he admitted to using a credit card check with insufficient funds to obtain a cashier’s check from a bank in the amount of $1,680,000.
The now-defunct Business Loans Express originated, sold, and serviced the loans under the SBA’s guaranteed loan program. BLX was one of the country’s largest SBA lenders. In 2009, Ciena Capitol, which acquired BLX agreed to pay $26.3 million to resolve a false claims action against BLX.
Patrick Harrington, who was an Executive Vice-President of BLX and headed the Troy, Michigan, branch of BLX pleaded guilty for his role in the fraud scheme which included falsifying loan documents, inflating appraisal values, and using straw purchasers to engage in sham transactions. Faraj assisted borrowers in misrepresenting the amount of the capital they contributed in order to qualify for the SBA loans. Harrington was sentenced to 120 months in prison and ordered to pay $33 million in restitution.
“David Faraj and others involved in this conspiracy attempted to exploit an SBA loan program, intended to promote small business growth and create jobs, for personal gain. [This] sentencing sends a message that the government will protect the integrity of SBA programs from those who choose to commit fraud and abuse,” stated Thomas Heinzer, Acting Special Agent in Charge Central Region, Small Business Administration, Office of Inspector General.
On top of Faraj’s 61 month prison sentence he has also been dealt 3 years supervised release and owes $8.9 million in restitution.
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