SBA Offer in Compromise Fraud: Why You Should Not Do It Yourself or Hire a Non-Attorney?
If you have received either a letter from the SBA lender or CDC calling for a default, electing to accelerate the SBA loan balance and a demand for payment or the Official 60-Day Due Process Notice from the SBA, you have a very limited time to make key decisions.
If you decide to handle the attempted negotiations with the SBA lender and/or the SBA, we believe you should take under advisement the following case and the potential dangers you might face whether you decide to “do it yourself (DIY)” and handle your own SBA OIC or hire some non-attorney company to represent you and attempt to do some “asset-dump and buy-back strategy” where you essentially defraud the SBA lender and/or the SBA.
Case in Point: U.S. v. Ward
Rene Michael Ward admitted in federal court that he submitted false documents and lied to the U.S. Small Business Administration.
He and his wife ran W. Home Furnishings in River Ranch until the SBA Lender, First Bank and Trust, stepped in and seized what was left in the rental space; it was estimated at the time that local customers were owed about $30,000 in furnishings they had paid for but never received. The Wards were both indicted on seven counts, including conspiracy to commit mail and wire fraud, wire fraud (two counts), submitting a false document to a department or agency of the U.S. and making a false statement to the SBA (three counts).
According to evidence presented at the guilty plea, the Wards submitted numerous false documents to the SBA in an attempt to have the SBA agree to their Offer in Compromise (OIC) to settle an outstanding loan of $511,400 for a $10,000 lump sum payment.
Among the lies the couple told, according to the plea, was a statement that they had liquidated assets of their store when instead they had moved the inventory. Additionally, at the time the OIC was presented and the Wards were claiming they had exhausted all of their funds to support the debt service, the couple had two CDs at First Bank & Trust, one for $10,000 and one for $11,054. Investigators also found that the Wards lied about transferring ownership of W. Home Furnishings to a third party (or straw man), Francisco Castellanos "The transfer of ownership' was a sham:' the plea agreement reads, "as Castellanos never owned W. Home Furnishings, never received any income from W. Home Furnishings, did not have access to the business bank accounts and never employed Rene Ward.
The Wards created a false appraisal of the furniture in their store (using another local businesswoman's name to perpetuate the falsehood) and ran personal expenses through the company, according to court documents. They also lied time and again about their income, investigators found, noting that they used the business account to make monthly rental payments of $2,500 on their home and monthly payments of $1,380 on their 2006 Porsche Cayenne, which was valued at $70,000, but did not claim the income in their disclosure statements to the federal government.
Rene faces five (5) years in prison and three (3) years of supervised release for one count of filing false documents to a government agency and also faces two (2) years in prison and one (1) year of supervised release for one (1) count of making false statements to the SBA. He also could be required to pay a $250,000 fine for both counts and must make restitution to all of his victims - prosecutors are still determining who was victimized and how much they are owed.
Click to view excerpts of the Indictment.
Click to view excerpts of the Plea Agreement.
If you need professional legal assistance preparing and negotiating an SBA Offer in Compromise (SBA OIC) or a Workout Agreement with either the SBA lender or the SBA, contact us today for a FREE Case Evaluation with an experienced SBA or Treasury workout attorney at 1-888-756-9969.
We can analyze your SBA loan, Treasury debt or Private Collection Agency problem and advise you on a range of potential solutions.
This presentation contains images that were used under a Creative Commons License. Click here to see the full list of images and attributions: