International Law

Franchise Fraud Loans

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A man was sentenced to 10 years in prison Thursday for the worst single case of loan fraud at the U.S. Small Business Administration, a scheme to provide federally guaranteed financing to buyers of gas stations, convenience stores and restaurants.

The losses linked to Patrick Harrington exceed $30 million, authorities said.

"I am profoundly sorry for my actions," he told U.S. District Judge Avern Cohn.

Harrington managed the Troy office of Business Loan Express, also known as BLX. Starting in 2000, he signed off on inflated property appraisals, phony down payments and other illegal steps in at least 86 loans, mostly in the Detroit and Flint areas.

The SBA backstops the US franchise loan industry. Essentially, this was a commercial mortgage equivalent of the residential mortgage fraud - fake property appraisals.

Interesting that in the fraud dominate economy that we haven't heard more about these types of economic crimes. It beggars belief that the only fake appraisals were on the residential side.

Full post as published by Misleading Advertising Law on November 13, 2008 (boomark / email).