|FOR IMMEDIATE RELEASE||CONTACT: DAVILYN WALSTON|
|TUESDAY, JANUARY 19, 2010||PUBLIC INFORMATION OFFICER|
|HTTP://WWW.USDOJ.GOV/USAO/txe||DIRECT: (409) 839-2538 CELL: (409) 553-9881|
LOUISIANA PETROLEUM COMPANY GUILTY IN SBA LOAN FRAUD SCHEME
Frontier Petroleum ordered to pay $200K fine for money laundering
BEAUMONT, Texas – U.S. Attorney John M. Bales announced today that a Louisiana-based company pleaded guilty for its role in a fraud and money laundering scheme in the Eastern District of Texas.
FRONTIER PETROLEUM CORPORATION pleaded guilty to money laundering today before U.S. District Judge Ron Clark. Subsequently, the company was sentenced by Judge Clark and ordered to pay a fine in the amount of $200,000.00.
According to information presented in court, Frontier Petroleum Corporation obtained a Small Business Administration (SBA) guaranteed loan in the amount of $480,000.00 for the purchase of a convenience store in Lake Charles, La., from a Port Arthur company in March 2004.
The SBA is an independent agency within the executive branch of the government that was created by Congress in 1953 for the purpose of encouraging the development of small businesses by, among other things, guaranteeing certain loans (or portions of loans) made by lenders to small businesses and thereby enabling the small businesses to obtain long-term credit that otherwise would not be available on reasonable terms and conditions. The SBA will issue guarantees of up to 90% of loan value. Generally, as a condition of receiving an SBA-guaranteed loan, the principal(s) of the small business are required to put a certain amount of their own money into the business. This "equity injection" reduces the need for debt, provides a cushion which helps the business endure economic slumps, and improves the collateral as security for the loan.
Prior to receiving the SBA-guaranteed loan, representatives of Frontier Petroleum provided documentation purporting to show that the corporation had met the condition of providing an equity injection of $120,000.00 of the company's own money in support of the loan. These representations were knowingly false, as Frontier Petroleum Corporation never had the required equity injection. Instead the $120,000.00 represented as being the company's own funds, were actually loaned to Frontier Petroleum by the seller of the property, in violation of SBA loan provisions.
The SBA-guaranteed loan to Frontier Petroleum Corporation closed on March 26, 2004, and the proceeds were then wire-transferred to the seller company's bank in Port Arthur, Texas. Then, on March 31, 2004, $314,602.34 of the SBA loan proceeds were wire-transferred from one bank account of the seller's company into another bank account of the seller's at SouthTrust Bank in Port Arthur , Texas. Since the funds that were transferred on that occasion constituted proceeds of the SBA loan that was obtained fraudulently by Frontier Petroleum Corporation, the transfer from one bank account to another to conceal the identity of those funds was money laundering.
The case against Frontier Petroleum Corporation was the result of a 24-month joint investigation by the SBA-Criminal Investigation Division and the Internal Revenue Service ("IRS") Criminal Investigation Unit. This case was prosecuted by Assistant U.S. Attorneys James Peacock and Joe Batte.
back to top