SBA Loan Fraud for Commissions

Rachel Dollar —  August 11, 2015 — Leave a comment

An indictment in a recent SBA case outlines a fraud for commission scheme that could easily occur in mortgage lending.

Jocelyn J. Brown, 59, San Diego, California, a former loan broker for the now-defunct La Jolla Bank, was indicted by a federal grand jury on charges that she paid kickbacks to the bank’s vice president and Small Business Administration lending department manager.

According to the indictment, Brown paid the bribes in return for the banker’s assurance that the loans Brown referred would be approved and funded, and, more importantly, that Brown’s commissions would keep on flowing. Brown allegedly collected tens of thousands of dollars in referral fees from La Jolla Bank, and kicked back a portion to the bank manager, in cash, every time she was paid, the indictment said.

According to the indictment, Brown worked as an unofficial broker for La Jolla Bank, referring business loan customers to the bank’s SBA department. As part of this job, Brown helped her borrowers compile their loan application packages and submit them to the bank. In return for generating business, La Jolla Bank paid Brown a commission or referral fee, calculated as a percentage of each loan she referred.

In 2006, as alleged in the indictment, Brown and the SBA manager made a deal where Brown would pay a portion of her commissions back to the SBA manager, in cash, after her clients’ loans were funded. In turn, the SBA manager would make sure that Brown’s clients’ loans were approved so that Brown could continue collecting tens of thousands of dollars in commission payments. In addition, the bank manager arranged to pay Brown a fraudulent $30,000 “commission” for a loan she in fact had no part in brokering or referring to the bank. Brown went so far as to generate a fake invoice, pretending that she had earned the commission. After she was paid, Brown cashed the $30,000 check and gave a portion of the cash to the bank manager.

Brown and the SBA manager allegedly agreed to conceal these bribe payments by hiding the commissions from borrowers, making the payments in cash, and lying to law enforcement agents if they were asked about the payments. In fact, the indictment charges, Brown did lie to law enforcement to conceal the conspiracy. Despite the fact that she and the SBA manager traded several phone calls and text messages and had a sit-down meeting in June 2014, Brown falsely reported to federal agents in September 2014 that she had not spoken to or seen the bank manager since before she learned about the federal investigation.

In this scheme, everyone wins, right?  The loan office and SBA manager get their commissions, the borrower get the loan … of course, La Jolla Bank failed and the FDIC took over the bank.   At the time of its failure, the bank had outstanding debt of over $1 billion, which the FDIC absorbed—and ultimately passed on to the American taxpayers.

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Rachel Dollar

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