Saehan Bank, SBA Loan Scam, California 2022

Saehan Bank, a California-headquartered bank, has been caught in a massive SBA loan scam, agreeing to pay $2.2 million to settle allegations under the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act.

According to the Justice Department, Saehan Bank misrepresented or withheld information to induce the SBA to fund a loan under the SBA’s 504 loan program, which offers small businesses long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization.

Before finalizing a 504 loan, the SBA requires certain certifications regarding the borrower’s financial condition and ability to repay the loan. However, the government alleges that Saehan Bank falsely certified that the borrowers had experienced no adverse change in their financial circumstances since their initial loan application, even though the bank knew that the borrowers were facing serious financial difficulties.

Relying on these alleged misrepresentations, the SBA approved the borrowers’ 504 loan. In addition to resolving its counterclaims against Saehan Bank, the United States obtained a default judgment on its cross claims against the borrowers, who never made any payments on the loan.

“The SBA offers valuable assistance to small businesses and contributes to our nation’s economic development, and we must protect the integrity of its programs,” said Tony West, Assistant Attorney General for the Civil Division. “The Justice will hold accountable those who betray the SBA’s trust and waste taxpayer dollars.”

“This case represents the cooperative effort of SBA’s Office of General Counsel and the Justice to uncover and remedy fraud in our lending programs,” said Sara D. Lipscomb, SBA General Counsel. “Uncovering and pursuing fraud cases is one of SBA’s highest priorities.”

“The size of this settlement should send a clear message to lenders and other participants in SBA lending programs that fraud and misleading statements will not be tolerated,” said Peggy E. Gustafson, Inspector General for the SBA.

The settlement announced today resulted from a collaborative effort by several federal agencies, including the Justice’s Civil Division, the U.S. Attorney’s Office for the Northern District of Oklahoma, and the SBA.

With this settlement, Saehan Bank is taking responsibility for its actions and paying the price for betraying the SBA’s trust.