Exec gets prison in fraud
Nov. 26, 08
DETROIT -- A Troy-based business executive received a 10-year sentence Thursday for what was described by authorities as the largest loan fraud scheme in the history of the federal Small Business Administration.
As a vice president and local office manager for a nationwide finance company called Business Loan Express (BLX), Patrick Harrington, 45, of Beverly Hills was connected to at least 89 fraudulent loans totaling about $85 million, according to the U.S. Justice Department.
"The effects and consequences of this fraud scheme are felt today in our community and will resonate nationwide for years to come," Acting U.S. Attorney Terrence Berg said in a statement released after the sentencing."The lesson from the court's imposing the maximum ten-year sentence should be very clear: Fraud in connection with lending is a serious crime that will land you in prison," he said.
Starting in 2000, Harrington signed off on inflated property appraisals, phony down payments and other illegal steps in federally guaranteed financing to buyers of gas stations, convenience stores and restaurants, mostly in the Detroit and Flint areas.
It was a "recipe for failure. The suffering economy had little to do with the high failure rate of the loans involved in this case," Assistant U.S. Attorney John Engstrom said.Harrington also was ordered Thursday to pay $34 million in restitution to the now-bankrupt BLX, the Small Business Administration and Community South Bank.
"I am profoundly sorry for my actions," Harrington told U.S. District Judge Avern Cohn at his sentencing. Harrington, who faced a 14-count indictment, pleaded guilty to conspiracy and lying to a grand jury.While making the loans, Harrington's salary, bonuses and other compensation totaled $4.2 million from 2001 through 2005. His retention bonus doubled to $150,000 in 2002. He was described by investigators as brazen and arrogant.
In a recorded conversation at the height of the federal investigation, Harrington warned an ally to stop driving an expensive BMW because it would anger the low-paid agents of the Small Business Administration's Office of Inspector General, and the United States Secret Service."It's the biggest loan fraud case in the history of the SBA," said Stan Chappell, an Inspector General's agent with the Small Business Administration.
A total of 34 others have been charged in connection with the fraud scheme, 17 of whom have been convicted and sentenced, including a Huntington Bank branch manager who got two years in prison for falsely reporting account balances to help BLX borrowers.The judge told Harrington he "inflicted mammoth injury on BLX and the employees of BLX" and "mammoth intangible loss to the SBA."
Business Loan Express had been one of the largest lenders participating in the SBA 7(a) Loan Guaranty Program, with offices throughout the country.
The Troy office of Business Loan Express now is closed and the company operates elsewhere under the name Ciena Capital of New York. Ciena Capital declared bankruptcy Sept. 30.
The Small Business Administration typically is responsible for 75 percent if a borrower defaults. The government's release from the guarantee could change, depending on the outcome of Ciena Capital's bankruptcy reorganization.
Defense attorney David DuMouchel told the judge Thursday that Harrington has personally suffered because of the crimes. "This is going to hang over his head for years," DuMouchel said.
The judge didn't order Harrington into immediate custody, but instead allowed him to report to prison in three weeks. Harrington remains free until then on $10,000 unsecured bond.
Source:http://www.detnews.com/apps/pbcs.dll
