Former Bank Executive Sentenced For $4.1 Million SBA Fraud, $18.2 Million FHA Fraud
JEFFERSON CITY – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that the former vice president of a Pulaski County, Mo., bank was sentenced in federal court Tuesday for leading a $4.1 million conspiracy to defraud the Small Business Administration, as well as participating in a separate and unrelated $18.2 million scheme to defraud the federal government while he was awaiting sentencing for the earlier fraud scheme.
Richard Newman Delong, 51, of Newburg, Mo., was sentenced by U.S. District Judge Brian C. Wimes to three years in federal prison without parole. The court also ordered Delong to pay $4,222,916 in restitution: $1,193,893 to the Small Business Administration (SBA); $1,257,327 to Mid-America Bank and Trust Company; $1,674,696 to Chubb Insurance and $98,000 to Brookshire Concrete.
On Jan. 24, 2014, Delong pleaded guilty to his role in a conspiracy to defraud the SBA. While on bond for that offense, Delong pleaded guilty in a separate and unrelated case on Dec. 4, 2015, to possessing and uttering a forged security as part of another scheme to defraud the government. Delong has remained in federal custody since his bond was revoked in November 2014. Today’s sentencing includes a sentence of three years in federal prison for the SBA fraud and two years in federal prison for the FHA fraud, to be served concurrently.
SBA Fraud Scheme
Delong was employed by Mid-America Bank in Dixon, Mo., as an executive vice-president and chief lending officer. Delong led a conspiracy from Jan. 1, 2005, to Feb. 5, 2010, to defraud the SBA by obtaining loans from Mid-America Bank that were guaranteed by the SBA under federal loan programs designed to provide financial assistance to qualified small businesses.
A number of loans were fraudulently obtained by businesses that were ineligible to receive them by concealing past due loan payments of distressed borrowers; making loans to nominee borrowers; making false entries in bank records; structuring loans so as to avoid the scrutiny of the bank’s board of directors; concealing unbooked letters of credit; funneling SBA guaranteed loan proceeds to themselves and others; misapplying loan proceeds; preparing fraudulent SBA borrower applications; and paying and accepting bribe money to secure loans.
Delong approved a number of fraudulent loans and prepared the false paperwork that secured SBA guaranties for loans for several co-defendants who have all pleaded guilty and been sentenced. Participants in this scheme include two business consultants (George G. Spencer and Dennis K. Depriest); the former branch manager of the SBA office in Springfield, Mo. (Larry Steven Aduddle); several business owners (Gerald E. Harris, Michael Edward Clegg, Perris D. Rask, Keith David Miller, and Lindell L. Vawter); and nominee loan borrowers (Andrea M. Clegg, Daniel J. Metz, James David Boothe, Catherine S. Debar, Randall S. Rogers, James Stewart Dunlop, Jr., and Scott E. Alexander).
As a result of Delong’s fraud, at least seven fraudulently obtained SBA-guaranty loans defaulted. (Additional loans that received SBA guarantees have defaulted, but no claim to pay the guarantee has been made to date.) Losses attributable to the portions of the loans that were not guaranteed by the SBA were borne by Mid-America Bank. As a result of the scheme, Mid-America Bank charged off $2,939,161 related to the default of the fraudulent loans involved in the scheme. Chubb Insurance paid Mid-America Bank $1,675,000 upon a claim on a policy it maintained.
HUD / FHA Fraud Scheme
Delong and co-defendant James J. Laughlin, 74, of Waynesville, Mo., each pleaded guilty to their roles in an $18.2 million fraud scheme.
Laughlin, one of the operators of 4-J Apartments in Pulaski County, Mo., admitted that he provided false information to the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) in order to obtain an $18,219,400 loan in 2012 for the operation and maintenance of 232 apartments and complexes in Pulaski County.
Laughlin involved DeLong, an employee of Brookshire Concrete while on bond awaiting his sentencing in the SBA fraud conspiracy, in the fraud scheme. Delong, who was fired by the company for his role in the scheme, worked with Laughlin to make it appear that Brookshire Concrete was renting apartments from 4-J. This would allow 4-J to artificially inflate its occupancy levels in order to qualify for the FHA loan.
Delong issued numerous checks that were made payable to 4J Apartments to give the appearance that rent was being paid by Brookshire Concrete; however, none of Brookshire’s employees ever lived in any of 4-J’s apartments.
These checks contained the forged signature of the company’s owner.
These cases were prosecuted by Supervisory Assistant U.S. Attorney Michael S. Oliver and Assistant U.S. Attorney Patrick Carney. They were investigated by the Small Business Administration, Office of Inspector General, the FBI and the Department of Housing and Urban Development, Office of Inspector General.