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Justice News

Department of Justice
U.S. Attorney’s Office
District of New Jersey

Wednesday, July 19, 2017

Middlesex County Man Admits $2 Million Fraud Involving Bogus Small Business Administration Loan

NEWARK, N.J. – A New Brunswick, New Jersey, man today admitted defrauding a bank by fraudulently using a federally-backed $2 million small business loan on personal expenses, Acting U.S. Attorney William E. Fitzpatrick announced.

John Cheng, 58, of New Brunswick, New Jersey, pleaded guilty before U.S. District Judge Claire C. Cecchi in Newark federal court to an information charging him with loan application fraud.

According to documents filed in this case and statements made in court:

On Dec. 7, 2007, Cheng submitted a Small Business Administration (SBA) loan application for $1.75 million and a commercial loan application for $2 million, purportedly for financing relating to a restaurant in Skillman, New Jersey.

The loan applications were submitted to an independent lender through the SBA Loan Guaranty Program, which authorizes the SBA to provide financial assistance to eligible small businesses through loan guarantees to participating lenders. Rather than loan money directly to small businesses, the SBA provided a guaranty to the independent lender that the SBA would repay a percentage of a loan in the event that a borrower defaulted.

Cheng’s SBA loan application falsely stated that the loan would be used for construction, acquisition of machinery and equipment, and working capital. After receiving $2,082,229 from the victim bank in March 21, 2008, Cheng used the funds for his own benefit, including paying off gambling debts, sending money to family members, and paying a federal tax bill.

The charge to which Cheng pleaded guilty is punishable by a maximum potential penalty of 30 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Under his plea agreement, Cheng must pay restitution of $2,657,687.15 to the bank he defrauded and forfeit $1,696,506. Sentencing is scheduled for Oct. 25, 2017.


Acting U.S. Attorney William E. Fitzpatrick credited special agents of the FBI, under the direction of Special Agent in Charge Timothy Gallagher in Newark, with the investigation. He also thanked the U.S. Small Business Administration’s Office of Inspector General, Eastern Region, under the direction of Special Agent in Charge Kevin Kupperbusch, and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), under the direction of Special Inspector General Christy Romero, for their assistance.

The government is represented by Assistant U.S. Attorney Jacob T. Elberg, Chief of the U.S. Attorney’s Office Health Care and Government Fraud Unit in Newark.

Defense counsel: Steven D. Altman Esq., New Brunswick, New Jersey

Press Release Number: 
Updated July 20, 2017