Former Bank Officials, SBA Bank Manager Among 16 Defendants Indicted in $10 Million Bank Fraud Scheme
|U.S. Attorney’s Office February 17, 2010|
SPRINGFIELD, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that two former bank vice presidents and the former branch manager of the Small Business Administration’s office in Springfield are among 16 defendants who have been indicted in five separate but related cases for their involvement in a bank fraud scheme that took advantage of business loans guaranteed by the Small Business Administration.
According to the indictments, the bank fraud scheme involved at least 31 fraudulent business loans, ranging from $100,000 to $1.6 million, issued by Mid-America Bank and Trust Company (MABTC) in Pulaski County, Mo., between January 2005 and January 2007. The fraudulent loans cited in the indictments total more than $10.1 million.
George G. Spencer, 53, and Dennis K. DePriest, 55, both of Ozark, Mo., Larry Steven Aduddle, 63, of Springfield, Mo., Richard N. DeLong, 44, of Newburg, Mo., Melinda L. Reese, 37, of Dixon, Mo., Gerald E. Harris, 68, of Edgar Springs, Mo., Michael Edward Clegg, 48, of St. Robert, Mo., his daughter, Andrea M. Clegg, 25, of Laquey, Mo., Perris D. Rask, 67, of Licking, Mo., Keith David Miller, 54, of Republic, Mo., and Lindell L. Vawter, 65, of Rock Island, Ill., were charged in a 185-count indictment returned under seal by a federal grand jury on Feb. 5, 2010. That indictment was unsealed and made public today upon the arrest and initial court appearance of DePriest.
DeLong was executive vice-president and chief lending officer at MABTC during the course of the alleged conspiracy. Reese was vice-president and loan compliance officer at MABTC from 1998 through May 2008. Aduddle was the branch manager of the Small Business Administration’s Springfield office from March 21, 2005, to May 21, 2007.
Several of the defendants were business owners. Rask owned Circle R Saloon, Inc., which ran the Rockin R Saloon and Adonia’s Steak and Seafood in St. Robert. Vawter owned and operated Vawter, Inc., doing business as A&W Root Beer/Long John Silver’s restaurant in St. Robert. Michael Clegg was president of Heintz Lighting One and Appliance, Inc. Miller owned and operated RadiusCom Corporation, which provided wireless Internet service in Republic, Missouri. Harris owned Harris Land Development, LLC and Gerald Harris Construction, Inc.
In separate but related cases, Daniel J. Metz, 65, of Eldon, Mo., Randall S. Rogers, 41, of Springfield, Mo., and Catherine S. Debar, 42, of Rolla, Mo., were charged in three separate indictments that were returned by a federal grand jury in Springfield on Dec. 17, 2009. In each case, the indictments allege, the defendants were nominee borrowers—that is, borrowers in name only, for loans that were secretly for the benefit of others. They allegedly claimed the loans would be used for legitimate business purposes, when in reality the loans were made to benefit others and for other purposes.
In another related case, James Stewart Dunlop, Jr., also known as “Stu,” 55, of Springfield, Mo., was charged in an indictment returned by a federal grand jury in Springfield on Dec. 17, 2009. In this case, the indictment alleges that Dunlop concealed his ineligibility for a Small Business Administration loan and that he conducted financial transactions to conceal the proceeds of the related bank fraud scheme.
The indictment that was unsealed today alleges that, beginning in January 2005, Spencer, DePriest, Aduddle and DeLong participated in a conspiracy to obtain loans from MABTC and to defraud the Small Business Administration. Those loans, according to the indictment, were guaranteed by the Small Business Administration under federal loan programs that were designed to provide financial assistance to small businesses. They and the other eight co-defendants in this indictment are also charged with participating in a bank fraud scheme to fraudulently obtain loans from MABTC.
According to the indictment, Spencer and DePriest assisted DeLong as consultants to Michael Clegg, Vawter and Rask, each of whom controlled failing businesses and had outstanding MABTC loans with significant past due balances. DeLong allegedly made loans and issued lines of credit to nominee borrowers, including entities controlled by Spencer, Harris and Boothe, in order to conceal unbooked letters of credit that he had issued in the name of MABTC. DeLong allegedly made additional loans to nominee borrowers including Rogers, Metz and Debar in order to conceal improvident loans, previously made nominee loans and nominee lines of credit, and to cure overdrafts.
As part of the conspiracy, the indictment alleges that DeLong made false entries in the records of MABTC to conceal disbursements of bank funds and past due loan payments of distressed borrowers. DeLong allegedly structured loans to avoid scrutiny of those loans by the MABTC board of directors.
According to the indictment, Spencer, DePriest, and others organized limited liability companies solely as nominee borrowers, the indictment says, and recruited nominee borrowers to funnel MABTC loan proceeds that were guaranteed by the Small Business Administration to themselves and others.
DeLong allegedly requested Small Business Administration guarantees of MABTC loans made to nominee borrowers recruited by Spencer and DePriest. DeLong allegedly signed fraudulent Small Business Administration loan authoriziations for MABTC loans whose proceeds ultimately benefitted Spencer, DePriest and others.
As part of the conspiracy, the indictment alleges that Spencer, DePriest and Dunlop prepared fraudulent Small Business Administration borrower applications for submission to the Small Business Administration. DeLong and others misapplied MABTC loan proceeds, some of which were guaranteed through Small Business Administration loan programs, by diverting those proceeds to Spencer, DePriest, and others.
The indictment also alleges that Spencer paid a $7,500 bribe to DeLong in order to receive a $195,000 business loan from MABTC.
The indictment charges various defendants in a total of 185 counts of making false bank entries, making false statements to MABTC, making false statements to the Small Business Administration, bank bribery, bank fraud, misapplication of loan funds, false bank entries and money laundering.
In separate indictments, Metz and Debar are each charged with two counts of making a false statement to MABTC in connection with a loan. Rogers and Dunlop are each charged with one count of making a false statement to MABTC in connection with a loan. Rogers is also charged with one count of money laundering. Dunlop is also charged with two counts of money laundering.
Phillips cautioned that the charges contained in these indictments are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.
These cases are being prosecuted by Supervisory Assistant U.S. Attorney Michael S. Oliver. They were investigated by the Small Business Administration – Office of Inspector General and the FBI.