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What can happen if an SBA loan obligor omitted or falsified information in the SBA loan application or the SBA Offer in Compromise?

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What can happen if an SBA loan obligor omitted or falsified information in the SBA loan application or the SBA Offer in Compromise?

Engaging in fraud may trigger an investigation by the SBA Office of Inspector General and U.S. Department of Justice

One of the most concerning factors an SBA debtor needs to be wary of is submitting a “false statement” or making a material “omission” in documents submitted to the SBA.  Many problems can occur if false representations or omissions are made in workout documents submitted to the SBA lender, CDC or the SBA.  These may include the SBA Offer in Compromise forms (for e.g., Forms 1150 and 770) and signed under 18 U.S.C. Section 1001.

Additionally, problems can occur if the SBA reviews the SBA loan application and discovers false representations or omissions in certain forms (for e.g., Form 912) that you initially submitted in order to obtain the subject loan from the SBA Loan Program.

If you face any of these scenarios, you may eventually become a “target” of the SBA Office of Inspector General and the U.S. Department of Justice.

What is a Target Letter from the U.S. Department of Justice?

A target letter is notice that you are under investigation for suspected violations of federal law. More aptly, the investigation is probably largely concluded upon your receipt of the notice having been delivered by a federal agent.

The letter is issued by a DOJ prosecution entity like a litigating division at Main Justice or any of the 94 United States Attorney’s Offices, all of whom have the Attorney General’s delegated authority to indict and prosecute targets. The letter provides the general nature of the charges, often by citation to specific United States Code sections indicating the federal law that Assistant U.S. Attorneys believe were broken, inadvertently or otherwise. The letter explains further that the addressee is a target with exposure for being prosecuted for violations of federal law, as opposed to a witness or subject, and believed to have information helpful to an investigation, but not considered culpable for the actual offense.

The letter explains the target’s constitutional rights against self-incrimination and to representation by counsel under the United States Constitution’s Fifth and Sixth Amendments. The letter provides a specific response time and identifies the Assistant U.S. Attorney, and sometimes the federal agency, investigating the alleged offenses.

Because the investigation is largely concluded before the target letter is signed, sealed and delivered, the Assistant U.S. Attorney could have taken the collected evidence and appeared before a grand jury to seek an indictment. Instead, the Assistant U.S. Attorney issued the target letter, which implies the Assistant U.S. Attorney’s desire to resolve the matter without a formal indictment. If the target responds, the Assistant U.S. Attorney is likely to give the target an opportunity to resolve the matter with an information and indictment waiver in lieu of grand jury presentment.

Click to view Sample Target Letters in PDF format:  Sample Target Letters

Below are sample target letters from DOJ

Sample Letter 1: Request for a Meeting

Dear [Name]:

A law enforcement agency, the SBA Office of Inspector General, assisted by this Office, is investigating you in connection with a loan obtained through the SBA Loan Program.  You and/or your small business are obligors on the subject loan.

I would like to meet with you to discuss this investigation. Please come to my office at [some date and time in the very near future] to meet to discuss this investigation. If you do not attend that meeting or respond to this letter, then this office is prepared to present evidence to a federal grand jury and ask for an indictment. If you do not attend this meeting, we may seek an arrest warrant if an indictment is returned against you.

Sincerely,

Assistant United States Attorney

Sample Letter 2: Request for a Lawyer Call

Dear [Name]:

A law enforcement agency, the SBA Office of Inspector General, assisted by this Office, is investigating you in connection with a loan obtained through the SBA Loan Program.  You and/or your small business are obligors on the subject loan.

This office is preparing to present evidence to a federal grand jury and ask for an indictment. If you would like to resolve this matter before an indictment and the possible issuance of an arrest warrant, please have an attorney representing you contact me before [some date that’s perhaps two weeks off].

Sincerely,

Assistant United States Attorney

Sample Letter 3:  Request to Come to the Grand Jury

Dear [Name]:

You are the target of an investigation by a Grand Jury sitting in [court location]. In connection with that investigation, you are invited to testify before the Grand

Jury.  As a Grand Jury witness you will be asked to testify and answer questions, and to produce records and documents. Only the members of the Grand Jury, attorneys for the United States and a stenographer are permitted in the Grand Jury room while you testify.

We advise you that the Grand Jury is conducting an investigation of possible violations of federal criminal laws involving, but not necessarily limited to information obtained through the SBA Office of Inspector General in connection with a loan obtained through the SBA Loan Program.  You and/or your small business are obligors on the subject loan.

You are advised that the destruction or alteration of any document required to be produced before the grand jury constitutes serious violation of federal law, including but not limited to Obstruction of Justice.

You are advised that you are a target of the Grand Jury's investigation. You may refuse to answer any question if a truthful answer to the question would tend to incriminate you. Anything that you do or say may be used against you in a subsequent legal proceeding. If you have retained counsel, who represents you personally, the Grand Jury will permit you a reasonable opportunity to step outside the Grand Jury room and confer with counsel if you desire.

Cordially,

Assistant United States Attorney

If you are attempting to submit an SBA Offer in Compromise or Workout to an SBA Lender, CDC or to the SBA in response to the Official 60-Day Notice, contact us today for a FREE initial consultation with an experienced attorney at 888-756-9969

We can analyze your SBA loan problems and advise you on potential solutions.

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