A recent case in federal court in Maryland provides an additional reminder (if any were needed) that fraud in connection with small business activities does not pay. In United States v. Oh, No. 11-CR-00600 (D. Md.), a Virginia attorney plead guilty to conspiracy to commit bank fraud and money laundering in connection with her role in falsifying records to secure loans from the Small Business Administration 7(a) program. Seung Oh, a real estate attorney, helped her clients by doctoring documents so that individuals could obtain loans under Section 7(a) of the Small Business Act. Section 7(a) provides guaranteed financing of 75-90% for qualified loans administrated by designated commercial lending institutions. According to the plea agreement, Oh “helped conceal the fact that none of the buyers/borrowers had injected sufficient equity into the deals to qualify for Section 7(a) loans.”
One of the methods Oh used was “netting” transactions so that the sale price would be negotiated for the subject business that was less than the price listed on the contract for sale. The contract would then be submitted to the bank, and the loan amount would increase by the amount needed for the down payment, which would conceal the amount of equity the buyer actually had. Oh would also “paper the file” with fraudulent copies of checks, creating a misleading closing file for SBA review. Additionally, Oh fronted money to customers through funds belonging to other clients in her escrow account at her law firm or title company. The various transactions involved multiple car washes and Laundromats, three Japanese restaurants, a Pan-Asian restaurant, a California Tortilla restaurant, and a liquor store.
Oh plead guilty on April 5, 2013 and is scheduled to be sentenced on July 9, 2013, where she will face a potentially significant prison sentence.
Brian Stolarz is the attorney responsible for the content of this article.