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Government Loan Programs

This archive displays posts tagged as relevant to fraud in government loan programs. You may also be interested in the following pages:

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September 19, 2019

Following his conviction at trial in September 2018, Azam Doost, the owner of a marble mining company in Afghanistan, has been sentenced to 4.5 years in prison, and ordered to pay $8.9 million in forfeiture and restitution to the government.  Doost had been convicted for his role in fraudulently obtaining and failing to repay a $15.8 million loan from the Overseas Private Investment Corporation, a U.S. government agency, to Equity Capital Mining LLC, which Doost owned at the time.  DOJ

June 12, 2019

In connection with the development of the Lakeway Regional Medical Center in Texas, a number of individuals and entities have agreed to pay $1.1 million to resolve claims that they made false claims in obtaining a loan insured by the Federal Housing Administration under a HUD program that insures loans to build hospitals in underserved areas.  Pacific Medical Buildings LLC, PMB Lakeway LLC, RD Development Partners LLC, Lakeway Management LLC, J&L Rush Family Partnership LP, Jeff Rush, and Brad Daniel, were alleged to have delayed refunds to investors who had cancelled their investments in order to make it appear as if the project satisfied mortgage covenants regarding the cash on hand required to close the loan. The settlement also resolves allegations that the settling parties received impermissible distributions of project funds. DOJ

Default by Nursing Home Chain on HUD-Guaranteed Mortgage Highlights Potential for Fraud in Section 232 Program

Posted  06/3/19
Nursing Home with Elderly People
Last week, the New York Times reported on the collapse of Rosewood Care Centers, a chain of nursing homes with facilities in Illinois and Missouri. According to the report, the chain had faced years of operational and financial difficulties, including fines by state regulators, personal injury claims by residents, and lawsuits by investors and vendors. When it went under, Rosewood defaulted on $146 million in...

May 7, 2019

The owners of a Colorado biomass power plant agreed to pay $2.6 million to settle allegations concerning fraud impacting the U.S. Treasury’s “1603 Program,” which reimburses companies up to 30%, in lieu of tax credits, for placing renewable energy properties into service. The company at the center of the fraud, Eagle Valley Clean Energy, allegedly applied for and received a 30% advance on a fee it was to pay co-defendant Evergreen Clean Energy, LLC for unspecified development services. Eagle Valley wrote off the fee but failed to return the advance to the U.S. Treasury. As part of the settlement, Eagle Valley paid $2.4 million, and the two owners of Eagle Valley, Evergreen, and parent company Evergreen Clean Energy CorporationDean Rostrom and Kendric Wait—paid $125,000 each. USAO CO

March 14, 2019

Former loan broker Loren Young Park pleaded guilty to bank fraud in connection with a scheme to obtain Section 7(a) loans guaranteed by the Small Business Administration loans on behalf of applicants who did not qualify for the loans.  Park and co-defendants submitted fraudulent documents in support of the loan applications, charged undisclosed fees, and failed to disclose interests they had in some of the applicants or their funding.  Park's plea agreement provides for a nine year prison sentence.  USAO MD; USAO MD re: sentencing

January 30, 2019

Laserlith Corporation, Black Hills Nanosystems Corporation, Blue Sky Engineering Inc., along with several corporate representatives, have paid $1.1 million in criminal restitution for making false statements in applications for loans from programs run by NASA, the National Science Foundation, and the Department of Energy.  Between 2012 and 2016, the companies sought funding through the agencies' Small Business Innovation Research Program and Small Business Transfer Technology Research Program, but misrepresented their status as related corporations sharing facilities and performing essentially equivalent work.  DOJ

January 29, 2019

E.M. Photonics, Inc. (“EMP”) and its Chief Executive Officer, Eric Kelmelis, will pay $2.75 million to resolve allegations that they violated the False Claims Act by seeking disbursements from federal agencies for falsified labor costs and duplicative work in order to maximize charges to contracts awarded by federal agencies. From January 2009 to April 2014, EMP received funds under seven different contracts and grants awarded through the federal Small Business Innovation (“SBIR”) and Small Business Technology Transfer (“STTR”) programs. EMP and Kelmelis directed EMP employees, or caused others to direct EMP employees, to complete false timesheets and submit false invoices and public vouchers for direct labor that did not occur. EMP and Kelmelis also sought and received SBIR/STTR funding for work already performed and funded by another government agency and falsely certified that such work was, in fact, non-duplicative. The government alleged that both of these schemes were designed to maximize charges to each contract or grant. DOJ

January 28, 2019

A producer of fish oil and fishmeal products, Omega Protein Corp., has agreed to pay $1 million to resolve allegations that when the company applied for a $10 million federal loan, it falsely certified that it was complying with federal environmental laws when, in fact, it was knowingly violating the Clean Water Act by discharging oil into U.S. waters. In 2013, the company pleaded guilty to criminal violations of the CWA.   The civil settlement arises from a False Claim Act case filed by a former employee of Omega, Keland O. Harrison, who will receive $200,000 of the settlement proceeds.  DOJ

September 24, 2018

Azam Doost, the former owner of Equity Capital Mining LLC, which operated a marble mine in Afghanistan, was convicted for defrauding the Overseas Private Investment Corporation, a U.S. government agency in a $15.8 million loan the company obtained from OPIC. Doost had represented that he had no affiliation with mine suppliers who were paid from the loan proceeds; in fact, he had financial relationships with several of the suppliers, and diverted OPIC funds paid to those suppliers for his own use.  DOJ  For information on later sentencing, see here.

September 17, 2018

A father and son duo have been sentenced to decades in prison and are to pay over $1 million in restitution for defrauding small businesses, the Department of Agriculture (USDA), and the Small Business Administration (SBA). After being hired to help small businesses win contracts with the USDA, father Joseph Glenn Osborne, Sr. allegedly stole over half a million dollars paid to his clients and used the money to buy himself a mansion. Father and son then conspired with others to fraudulently win contracts with the same agency for son Joseph Glenn Osborne, II's business, and were awarded five contracts worth over $4 million. After the contracts were terminated for default—and company funds were used to fund renovations for the aforementioned mansion and extravagant nights out—they attempted to fraudulently win contracts with the SBA. USAO SDCA

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