Kankakee-Area Father, Son Plead Guilty in $1.7 Million Bank Fraud Scheme
| U.S. Attorney’s Office February 11, 2014 |
URBANA, IL—Sentencing has been scheduled for May 16, 2014, for Bourbonnais, Illinois businessman Gregory Yates, 54, and his son, Terrance Yates, 32, who yesterday entered pleas of guilty to defrauding a federal business loan program of $1.7 million. Both appeared yesterday afternoon before U.S. Magistrate Judge David G. Bernthal in Urbana. 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. Both defendants were allowed to remain on bond.
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 in 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 and tools and equipment to operate within the facility and to 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.
At sentencing, the maximum statutory penalty for conspiracy to commit bank fraud is up to 30 years in prison. For money laundering, the maximum statutory penalty is 10 years in prison.
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 is being prosecuted by Assistant U.S. Attorney Eugene L. Miller.