Kankakee-Area Father, Son Sentenced in $1.7 Million Bank Fraud Scheme
|U.S. Attorney’s Office May 16, 2014|
URBANA, IL—A Bourbonnais, Illinois businessman Gregory Yates, 54, and his son, Terrance Yates, 33, were sentenced this morning for defrauding a federal business loan program of $1.7 million. U.S. District Judge Michael P. McCuskey ordered Gregory Yates to serve 12 months and one day in prison, followed by three years of supervised release; Terrance Yates was sentenced to one day in prison, followed by three years’ supervised release, with the first 12 months of supervised release to be served as home detention. Both were ordered to pay restitution in the amount of $1,387,816. Gregory Yates is to report to the federal Bureau of Prisons on July 23, 2014. The government recommended to the court that each defendant serve 33 months in prison.
On February 10, 2014, Gregory and Terrance Yates each pled guilty to one count of conspiracy to commit bank fraud. In addition, Terrance Yates pled guilty to one count of money laundering.
At the time of the fraud, from April 2009 to July 2011, Gregory Yates was the president and chief executive officer of Quality Concepts LLC; his son, Terrance, was the chief financial officer. Gregory Yates also owned and operated QC Manufacturing LLC and Champion Development LLC, a construction company. Terrance was the chief financial officer and vice president of operations for Champion Development LLC. For each company, the principal office location was 1475 Harvard Drive, Kankakee, Illinois.
In court proceedings and according to court documents, in May 2009, Gregory Yates, doing business as QC Manufacturing LLC, purchased a manufacturing facility, tools and equipment, owned by Casey Tool and Machine, at 400 West Delaware Ave. in Casey, Illinois. At the time of the purchase, Casey Tool and Machine was in bankruptcy. Prior to its bankruptcy, Casey Tool and Machine was owned by Gregory Yates’ brother, Jim Yates.
In November 2009, QC Manufacturing LLC applied for and was subsequently awarded a Business and Industry Loan through the U.S. Department of Agriculture, Office of Rural Development. Although the $5.95 million loan was processed through Country Bank of Aledo, the loan guarantee was funded by the USDA using money allocated through the American Recovery and Reinvestment Act.
Gregory Yates admitted that, as part of the loan application, he submitted a letter stating that he intended to use the $5.95 million USDA loan to purchase a vacant manufacturing facility in Casey, Illinois; tools and equipment to operate within the facility; and start up working capital for initial cash and inventory.
The letter represented that the facility would be used to produce and distribute precision lighting equipment and he estimated that more than 200 new jobs would be created. The loan application included a budget of $1.7 million to perform construction and improvements on the Casey facility.
Although the bank approved the loan, including the renovation budget, QC Manufacturing LLC was required to complete the work for which it was requesting payment before Country Bank would fund any portion of the $1.7 million allocation. Gregory and Terrance Yates admitted that they agreed with each other to use only their own construction company, Champion Development, and no subcontractors, to perform the construction and improvements. By listing only their own construction company, the Yateses admitted they were able to falsely and substantially inflate the value of the labor or materials furnished by Champion Development, thereby drawing money from the USDA loan for work that was either never performed or was of lesser value than claimed on the contractor’s sworn statements provided to the bank. For example, Gregory Yates admitted he told employees of Champion Development to “simply spruce up” the Casey facility to lower the cost of improvements.
Terrance, in agreement with Gregory Yates, admitted that fraudulent sworn statements and affidavits, signed by Terrance, were submitted to the bank claiming that Champion Development had performed work and supplied materials. Based on these fraudulent statements, the bank disbursed $1.7 million to QC Manufacturing. Of the $1.7 million disbursed, more than $1.3 million was transferred from QC Manufacturing to Champion Development and then transferred to other accounts.
The charges were investigated by Internal Revenue Service Criminal Investigation; the U.S. Department of Agriculture Office of Inspector General; the Federal Deposit Insurance Corporation (FDIC) Office of Inspector General; and the FBI. The case was prosecuted by Assistant U.S. Attorney Eugene L. Miller.