Business loan

Four Iowa residents plead guilty to small business loan fraud scheme

DES MOINES, Iowa (AP) – Three former bank executives and the president of a loan service provider have pleaded guilty to conspiring to commit wire fraud in a scheme that defrauded the Small Business Administration million dollars, federal prosecutors said on Friday.

The defendants are Michael Slater, 65, of Clive, former chairman and founder of Vital Financial Services; Larry Henson, 70, of Davenport; Andrew Erpelding, 43, of Davenport; and Susan McLaughlin, 68, of Bettendorf. The latter three were executives at Valley Bank, a now defunct bank based in Moline, Illinois.

Prosecutors said the four admitted to obtaining loan guarantees from the SBA on behalf of Valley Bank borrowers, even though the loans did not meet the agency’s collateral requirements.

Among other actions, they changed loan payment histories, renamed companies and withheld information that borrowers had already defaulted on their loans, prosecutors said.

When the loans defaulted, the defendants submitted repayment requests to the SBA to purchase the overdue loans from investors and lending institutions, which transferred most of the losses on ineligible loans to the federal agency.

In total, the defendants attempted to obtain guarantees on loans over $ 14 million. They successfully secured guarantees on over $ 9 million in loans and cost the SBA over $ 4.5 million.