The transcript of the video follows below for further review.
SBA Office of Inspector General's Spring 2016 Report to Congress
Pursuant to the Inspector General Act of 1978 (the IG Act), as amended, the Office of Inspector General (OIG) provides independent, objective oversight to improve the integrity, accountability, and performance of SBA and its programs for the benefit of the American people. While SBA’s programs are essential to strengthening America’s economy, the Agency faces a number of challenges in carrying out its mission. Challenges include fraudulent schemes affecting all SBA programs, significant losses from defaulted loans, procurement flaws that allow large firms to obtain small business awards, excessive improper payments, and outdated legacy information systems.
The U.S. Small Business Administration (SBA or the Agency) Office of Inspector General’s (OIG) recently provided its Spring 2016 Semiannual Report to Congress. The OIG report describes OIG’s activities from October 1, 2015 through March 31, 2016. OIG which continues to focus on the most critical risks facing the SBA.
The OIG’s resources are directed at key SBA programs and operations to include Agency management challenges, financial assistance, disaster assistance, Government contracting and business development, financial management and information technology, and security operations.
During the reporting period, OIG issued 12 reports with 49 recommendations to improve SBA operations and reduce fraud and unnecessary losses in the Agency’s programs. In addition, OIG investigations resulted in 18 indictments and 24 convictions. Overall, OIG’s investigations and audits achieved monetary recoveries and savings of $106.7 million. OIG also sent 36 suspension or debarment referrals to SBA and 2 additional suspension or debarment referrals to other agencies.
Some of the key reviews and investigative outcomes detailed in the OIG report are highlighted below:
Georgia Bank President Sentenced to 7 Years in Prison and Ordered to Pay $3.9 Million in Restitution
The former president of a Georgia banking company was sentenced in Federal court to 7 years of incarceration and 3 years of supervised release. He was also ordered to pay $3.9 million in restitution. The man previously had pled guilty to conspiracy to commit bank fraud and conspiracy to commit major fraud against the United States. He admitted that, from 2005 through 2010, he conspired with others to obtain money, funds, credits, securities, and other property of the banking company while replacing non-performing loans with new Government guaranteed loans, including a $1.5 million SBA-guaranteed loan to a Georgia business. This was done to make the bank appear financially stronger than it actually was. To save the failing bank, the president continued these illegal activities during the time that the bank received assistance from the Troubled Asset Relief Program (TARP), a Government initiative established to help institutions during a financial crisis. His actions caused a monetary loss to SBA, the U.S. Department of Agriculture (USDA), and the FDIC of over $3.9 million. This is a continuing joint investigation with the FDIC, Special Inspector General for TARP, FBI, USDA OIG, and Tift County (GA) Sheriff’s Office.
7(a) Lender to Pay SBA $299,318 for Failing to Properly Follow SBA’s Origination and Closing Requirements
OIG reviewed a $1.3 million 7(a) loan intended to acquire a limousine service. The OIG identified that a 7(a) lender did not provide sufficient information to support that it approved the loan in accordance with SBA’s origination and closing requirements. Specifically, the lender did not inspect or adequately value the significant fixed assets for this limousine and transportation service business, resulting in increased losses to SBA. SBA has agreed to recover the $299,318 guarantee payment from the lender to cure the lender’s material deficiencies on this loan.
(a) Lender to Pay $2 Million to SBA for not Complying with SBA’s Origination and Closing Requirements
OIG identified that another 7(a) lender did not provide sufficient information to support that it approved the loan in accordance with SBA’s origination and closing requirements. Specifically, the lender did not comply with material SBA requirements regarding new construction of and improvements to an existing building. We also determined that the lender failed to address and mitigate adverse changes affecting both project control and the borrower’s financial condition, compounding the risk to the SBA loan. As a result, SBA has agreed to recover from the lender the $2 million guarantee payment to cure the lender’s material deficiencies on this loan.
OIG Hotline
OIG’s Hotline reviews allegations of waste, fraud, abuse, or serious mismanagement within SBA or its programs from employees, contractors, and the public. During this reporting period, the Hotline received 641 complaints. Hotline conducts a preliminary review of each allegation and may consult with OIG’s Investigations Division, Auditing Division, and Office of Counsel to determine the appropriate course of action. Referrals within OIG may result in corrective actions, audits, or administrative, civil, or criminal investigations. Hotline staff monitor matters referred to SBA program offices for further action to ensure timely response and adequate resolution of the allegations, and corrective action taken."
A complete copy of the OIG’s Report to Congress can be found here: Spring 2016 Semiannual Report to Congress
If you are facing an SBA loan default, contact us today for a consultation with an experienced SBA workout attorney at 888-756-9969
We analyze your SBA loan problems and advise you on potential solutions such as an SBA offer in compromise for your SBA loan default.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Client personally guaranteed an SBA 7(a) loan to help with a relative’s new business venture. After the business failed, Treasury was able to secure a recurring Treasury Offset Program (TOP) levy against his monthly Social Security Benefits based on the claim that he owed over $1.2 million dollars. We initially submitted a Cross-Servicing Dispute, but then, prepared and filed an Appeals Petition with the SBA Office of Hearings and Appeals (SBA OHA). As a result of our efforts, we were able to convince the SBA to not only terminate the claimed debt of $1.2 million dollars against our client (without him having to file bankruptcy) but also refund the past recurring amounts that were offset from his Social Security Benefits in connection with the TOP levy.
Client personally guaranteed an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.
We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.
The clients are personally guaranteed an SBA 7(a) loan. The SBA referred the debt to the Department of Treasury, which was seeking payment of $487,981 from our clients. We initially filed a Cross-Servicing Dispute, which was denied. As a result, we filed an Appeals Petition with the SBA Office of Hearings and Appeals asserting legal defenses and supporting evidence uncovered during the discovery and investigation phase of our services. Ultimately, the SBA settled the debt for $25,000 - saving our clients approximately $462,981.
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