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U.S. Small Business Administration Office of Inspector General Investigations Division. Bruno Genrich Special Agent Detroit Field Office Detroit, MI. Purpose of the Office of Inspector General.
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Office of Inspector General
Detroit Field Office
Established by Congress under the Inspector General Act of 1978 to investigate fraud, waste, and abuse.
Investigative findings are used as a basis for criminal and civil actions, administrative actions, and revising regulations.
Auditing- evaluates SBA procedures. The division can audit entire programs, or selected parts of programs in an office. Auditors determine if procedures being followed.
Investigations - conducts investigations involving SBA programs, program participants, and SBA personnel. The emphasis is on criminal violations. OIG Special Agents are statutory federal law enforcement officers.
-Insufficient 7(a) staffing
-Office of Lender Oversight/staffing
In your evaluation of a loan package, you may encounter various indicators of fraud. An indicator of fraud is a fact or a set of facts, usually of an irregular nature, which in the light of all other known facts and circumstances, may be reasonably interpreted as being suspicious. There is no stereotyped situation that fits all circumstances to determine if an indication of fraud exists. Rather, the determination must be separately made in each case through application of your professional judgment.
Most common category - false statements - occur on loan applications, financial
statements, and supporting documents such as invoices and personal history statements.
overvaluing or phony collateral
understating liabilities and debts
failure to disclose criminal record
ownership of business - not true owner
False cash/capital injection –MAJOR ISSUE
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A person who is compensated by the applicant or lender to prepare the Applicant’s application package for SBA financial assistance, or simply refers applicants to a Lender.
Packagers targeting ethnic groups.
Charging high fees for packaging loan.
Participating in the closing.
Fees paid at closing (first check on Express loan).
Borrower is unaware of actual fee.
Information on HUD 1 Submitted to Lender Buyer: Kassem Faraj d.b.a. Kassey’s Family Restaurant, IncSeller: Imad Deaibes d.b.a. D.I. Investments, Inc.
Imad Deaibes d.b.a. D.I. Investments
HUD 1 Approved by BLX Wire Transfer from BLX to Title Co. $920,000
$41,115.08 to Buyer
Contract Sales Price $1,650,000
HUD Prepared and submitted to BLX by
$330,000 Deposit Outside of Closing
Kassem Faraj Kassey’s Family Restaurant, Inc.
$529,132.90 to Seller
Imad Deaibes d.b.a. DFC Inc
HUD 1 Approved by BLX Wire Transfer from BLX to Midwest $920,000
$3,678.54 to Ajrouche, Dima Oil
$110,000 to Faraj
Straw Buyer for David Faraj
$41,155.080 to Buyer
$35,000 to Midwest
$0 to Buyer
HUD prepared and submitted to BLX by Guthrie
No deposit ever made
$40,000 wire to D.F.C.
$88,132.90 paid to D.I. Investments
$21,709.26 transferred to Clio account
$200,000 wire to Lebanese account
$529,132.90 check to D.I. Investments cancelled.
Dearborn, MI Title Company conspired with loan brokers by facilitating fraudulent loan closings. Title company prepared false HUD-1 Settlement Sheets; Fronted down payments and disguised disbursements.
Iowa banker forged an SBA loan officer’s name to a letter. The letter fraudulently represented that the borrower had increased the required cash equity from $10,000 to $15,000.
During the OIG interview, the banker admitted he forged the name. Banker was criminally prosecuted for false statement/forgery. Fired by the bank and now has a felony record.
Bank President in Kansas had knowledge that a borrower was concealing adverse information in their SBA loan. USAO filed a civil case against the bank. SBA recovered the guarantee and the bank agreed to release SBA on additional guaranteed loans. The bank also volunteered to a 5 year debarment from the SBA 7(a) program.
Work with SBA and Lenders to develop a Loan Agent data base to effectively register and monitor loan agent activity.
Develop legislative language to expand criminal statutes from 5 years to 10 years in non-bank loans
Strengthen SBA 7(a) oversight procedures
Detroit Field Office
(313) 226-6075 ext 249