News and Press Releases

Dearborn Resident Sentenced For His
Role In $84 Million Loan Fraud

FOR IMMEDIATE RELEASE
November 17, 2011

David Faraj, 44, of Dearborn, was sentenced today to 61 months in prison for his participation in an $84 million dollar Small Business Administration (SBA) loan scheme announced United States Attorney Barbara L. McQuade. Ms. McQuade was joined in the announcement by Jeffrey Frost, Special Agent in Charge of the U.S. Secret Service, Detroit Field Office and Thomas Heinzer, Acting Special Agent in Charge Central Region, Small Business Administration, Office of Inspector General.

United States District Judge Patrick J. Duggan also sentenced Faraj to 3 years supervised released and ordered him to pay approximately $8.9 million in restitution.

Faraj pleaded guilty on October 29, 2009. According to the plea documents, between 2000 and 2005, Faraj obtained SBA guaranteed loans through the use of straw purchasers. He falsified documents to make it appear that the straw purchasers were credit worthy. Because he was a convicted felon, he was unable to obtain the SBA loans himself, and needed to use straw purchasers. Faraj admitted to using fraudulently obtain loans to purchase 17 properties. Additionally, he admitted to using a credit card check with insufficient funds to obtain a cashier's check from a bank in the amount of $1,680,000.

The now-defunct Business Loans Express originated, sold, and serviced the loans under the SBA’s guaranteed loan program. BLX was one of the country’s largest SBA lenders. In 2009, Ciena Capitol, which acquired BLX agreed to pay $26.3 million to resolve a false claims action against BLX.

Patrick Harrington, who was an Executive Vice-President of BLX and headed the Troy, Michigan, branch of BLX pleaded guilty for his role in the fraud scheme which included falsifying loan documents, inflating appraisal values, and using straw purchasers to engage in sham transactions. Faraj assisted borrowers in misrepresenting the amount of the capital they contributed in order to qualify for the SBA loans. United States District Judge Avern Cohn sentenced Harrington to 120 months in prison and ordered him to pay $33 million in restitution.

“David Faraj and others involved in this conspiracy attempted to exploit an SBA loan program, intended to promote small business growth and create jobs, for personal gain. Today's sentencing sends a message that the government will protect the integrity of SBA programs from those who choose to commit fraud and abuse,” stated Thomas Heinzer, Acting Special Agent in Charge Central Region, Small Business Administration, Office of Inspector General

"Financial fraud schemes such as this have evolved significantly over the last several years in our area" said Jeffrey Frost, Special Agent in Charge of the U.S. Secret Service, Detroit Field Office. "Cooperation between law enforcement agencies at the Southeastern Michigan Financial Crimes Task Force (SEMFCTF) has allowed us to focus our resources and respond quickly to uncover criminal activity such as this type of financial fraud

The case was prosecuted by Assistant United States Attorney Philip A. Ross. The case was investigated by the United States Secret Service and the Small Business Administration, Office of Inspector General.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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