Small Business Administration

A settlement has been reached to resolve False Claims Act allegations against Saehan Bank who is accused of misrepresenting or withholding information from the Small Business Administration (SBA).

The settlement resolves allegations that the California-headquartered bank misrepresented or withheld information to induce the SBA to fund a loan under the SBA’s 504 loan program, which offers small businesses long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization.

Before finalizing a 504 loan, the SBA requires certain certifications regarding the borrower’s financial condition and ability to repay the loan. The government alleges that Saehan Bank falsely certified that the borrowers had experienced no adverse change in their financial circumstances since their initial loan application, even though the bank knew that the borrowers were facing serious financial difficulties. Relying on these alleged misrepresentations, the SBA approved the borrowers’ 504 loan. In addition to resolving its counterclaims against Saehan Bank, the United States obtained a default judgment on its cross claims against the borrowers, who never made any payments on the loan.

A settlement has been reached in a whistleblower class action lawsuit brought against Ciena Capital LLC and a subsidiary, Business Loan Center (BLC).  They are accused of submitting false claims for payment on loans made through the Small Business Administration (SBA).

The settlement for $26.3 million, which includes a credit for $18.1 million previously negotiated by andpaid to the SBA. The whistleblowers will receive $4.3 million as their share of the government’s recovery. 

The original case was filed in 2004.  The United States alleged Ciena and BLC falsely certified that they complied with SBA regulations when they submitted claims for payment on loans they originated, underwrote, and serviced.  Some of these loans defaulted shortly after they were made as a result of Ciena’s and BLC’s disregard of SBA rules, regulations, and underwriting requirements.  Other loans were originated by former BLC Executive Vice President Patrick Harrington, or his office, during his tenure.  Harrington pleaded guilty to conspiracy to defraud the United States and was sentenced to 10 years in prison for his prominent role in the fraudulent loan scheme, which included falsifying loan documents, inflating property appraisals, and using straw purchasers to engage in sham transactions.  This settlement also resolves allegations that the defendants’ parent company, Allied Capital Corporation, is liable for the acts of its subsidiaries.