DES MOINES, Iowa (AP) — Three former bank executives and the president of a lending service provider have pleaded guilty to conspiracy to commit wire fraud in a scheme that defrauded the Small Business Administration of millions of dollars, federal prosecutors announced Friday.
The defendants are Michael Slater, 65, of Clive, former president and founder of Vital Financial Services; Larry Henson, 70, of Davenport; Andrew Erpelding, 43, of Davenport; and Susan McLaughlin, 68, of Bettendorf. They latter three were executives with Valley Bank, a now defunct bank based in Moline, Illinois.
Prosecutors said the four admitted obtaining loan guarantees from the SBA on behalf of Valley Bank borrowers, even though the loans did not meet the agency's requirements for guarantees.
Among other actions, they altered loan payment histories, renamed businesses and hid information that borrowers had previously defaulted on loans, prosecutors said.
When the loans defaulted, the defendants submitted reimbursement requests to the SBA to purchase the defaulted loans from investors and lending institutions, which shifted most of the losses on the ineligible loans to the federal agency.
In all, the defendants tried to obtain guarantees on over $14 million in loans. They successfully obtained guarantees on more than $9 million in loans and caused the SBA to lose more than $4.5 million.