Orange County Man Pleads Guilty to Defrauding Banks and SBA by Illegally Obtaining Commercial Loans Worth More Than $10 Million
SANTA ANA, CA—An Orange County businessman has pleaded guilty to federal charges related to a series of fraud schemes that include one in which he worked with his criminal defense attorney to fraudulently apply for millions of dollars in loans backed by the Small Business Administration (SBA).
Donald Keith Goff, 66, of Laguna Niguel, pleaded guilty late yesterday to three felony counts—mail fraud, wire fraud and bank fraud—for leading a group of conspirators in a series of complex, multi-million dollar fraud schemes. In one scheme, Goff admitted that he and his criminal defense attorney conducted a scam after Goff had already been indicted by a federal grand jury in the prior fraud.
According to court documents and his admissions in court, Goff orchestrated a scheme in 2006 and 2007 to defraud Grand Pacific Financing Corporation (GPFC), which provided a $4.5 million loan to finance the purchase of a gas station business in Fountain Valley. Goff was unable to obtain the loan himself as a result of his poor credit rating, history of being sued by creditors and failure to pay judgments. To obtain the loan, Goff created a shell corporation and recruited an unemployed truck driver to act as a “straw buyer” who posed as the owner of the shell company and applied for the loan in the corporation’s name. As part of the scheme, Goff and a co-conspirator included false information in the loan application regarding the straw buyer’s experience and assets. In addition, Goff and a co-conspirator bribed an escrow agent to falsely advise the bank that a $600,000 equity down payment had been used for the purchase, when in fact no down payment was made. During this scheme, Goff worked with his wife, Melanie Goff; his step-daughter, Monty Brown; a business associate named Leon Draper; and others.
Later in 2007, after obtaining the loan from GPFC and gaining control of the Fountain Valley gas station business, Goff orchestrated a scheme to defraud Nara Bank. In this fraud, Goff formed another shell corporation, installed his wife as owner and had the new shell corporation “buy” the gas station business. Goff then had his wife and step-daughter apply to Nara Bank for a loan to “refinance” the supposed debt one shell company owed the other, without disclosing to the bank that they controlled both companies. Nara Bank was provided false information regarding his wife’s credit history and a $600,000 deposit supposedly put down on the purchase. When the deal closed, more than one-third of the $1.4 million in loan proceeds were transferred to a bank account the Goffs controlled.
Over the rest of 2007, Goff and his family used the Nara Bank loan proceeds, as well as money siphoned from the gas station business, to pay personal expenses, including purchasing luxury items. By early 2008, the shell corporations had defaulted on the GPFC and Nara Bank loans, which caused each financial institution to suffer losses of several hundred thousand dollars. The SBA, which partially guaranteed the Nara Bank loan, lost nearly $1 million.
In May 2012, a federal grand jury in Santa Ana indicted Goff, his wife, Brown and Draper in the schemes to defraud GPFC and Nara Bank. After he was charged, Goff was represented in the case by defense attorney Gino Pietro.
After the indictment, Goff, Brown and Pietro engaged in a similar plot to defraud Hana Small Business Lending, Inc. In this scheme, Goff and Pietro created a shell corporation and recruited a straw buyer—this time, former attorney Gregory Sullivan—to pose as the owner of the new shell corporation and to apply for $4.5 million in loans to finance the purchase of gas station businesses in Anza, California and Imperial, California. This scheme also involved providing false information regarding the straw buyer’s experience and assets, bribing an escrow agent to falsely tell Hana that there were $2.1 million in down payments, and overstating the sale prices of the businesses. Hana funded the loans, which were guaranteed by the SBA. From the loan proceeds, Goff and his family received nearly $300,000, Pietro received $250,000, and Sullivan received $100,000. Over the next six months, Goff and his family used the loan proceeds and substantial funds from the gas station businesses for personal expenses, as they began to default on the loans from Hana, which has since foreclosed on the business. Hana and the SBA now face an estimated $3 million in losses.
As a result of these schemes, investigators believe that banks and the SBA suffered losses of approximately $5 million.
“Attempts to use SBA’s 7(a) loan program as a personal checking account will be met with the full force of the U.S. justice system,” said SBA Inspector General Peggy E. Gustafson. “Together with our law enforcement partners, the OIG will continue to ensure those who commit fraud are brought to justice.”
Goff pleaded guilty late Monday afternoon before United States District Judge Andrew J. Guilford, who is scheduled to sentence the defendant on November 17. As a result of today’s guilty pleas, Goff faces a statutory maximum sentence of 70 years in federal prison.
Melanie Goff and Brown previously pleaded guilty and are scheduled to be sentenced by Judge Guilford, respectively, on October 6 and January 12, 2015.
Draper has signed a plea agreement and is scheduled to plead guilty on Friday in federal court in Santa Ana.
Pietro, who was charged separately by the United States Attorney’s Office in San Diego, has also pleaded guilty. Pietro is scheduled to be sentenced by Judge Guilford on October 20.
Sullivan is scheduled to go on trial in Santa Ana federal court on December 9.
These criminal cases are the result of an investigation by the U.S. Small Business Administration—Office of Inspector General and the Federal Bureau of Investigation. The United States Attorney’s Office for the Southern District of California provided substantial assistance on this case.