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SBA Loan Firm Is Subject of Investigation : Investigations: State's Justice Department alleges David Turkin's Inter-Cal Financial misrepresented what his company could do for clients in at least 44 cases.

November 02, 1993|DON LEE | TIMES STAFF WRITER

WOODLAND HILLS — After a five-month investigation, the state's Justice Department has alleged that David Turkin, a consultant specializing in "packaging" federal Small Business Administration loans, defrauded entrepreneurs of at least $178,000 by assuring clients he would help them get loans.

Investigators say Turkin, who runs Inter-Cal Financial of Woodland Hills, charged on average $2,000 to $5,000 in advance fees for putting together SBA loan applications. Turkin advertised regularly in major newspapers, and he did help prepare the applications, state officials say. But in at least 44 cases over several years, investigators allege, Turkin misrepresented what he could do for clients--many of them struggling business operators with poor credit histories.

"We feel he's committed grand theft by false pretenses, by misstating what he can do," said David Young, a special agent for the state Justice Department in Los Angeles. In September, Young led a team of investigators who, with a search warrant, seized half a dozen boxes of files at Turkin's offices.

Young said the allegations against Turkin are contained in a 30-page report he will present this week to the county's district attorney's office for possible criminal prosecution.

Turkin, 48, says he never made guarantees to clients. He contends that some former customers misinformed him or failed to provide documents, resulting in loan rejections or processing delays.

"All we do is put the paperwork together," Turkin said in an interview. Inter-Cal, which has four employees, operates out of a house Turkin owns on Fallbrook Avenue.

Carlos Cantero, 44, owner of a tire-repair business in Sylmar, said he called Inter-Cal in June, 1992, after reading one of Turkin's newspaper ads. Cantero had a history of loan rejections from banks. But when he met Turkin, Cantero was filled with hope. Cantero was one of the business people interviewed as part of the state's investigation.

"He said my chances were pretty good," Cantero recalled. "He told me it would take two months to get my (SBA) loan." Turkin also wanted a fee of $2,300--upfront. That evening Cantero wrote him a check for $700, and he sent the rest a couple of weeks later, he said, borrowing the money from a friend.

But Cantero says he didn't hear from Turkin for months. Finally last May, Cantero received a rejection letter from Queen City Bank in Fountain Valley, which said Cantero had inadequate cash flow to qualify for a $50,000 loan.

Cantero has since tried to get back the $2,300 fee he paid Turkin, but he said Turkin has been unresponsive. "I think I got taken," Cantero said recently.

Turkin denies he made any assurances to Cantero. Turkin claims he first submitted Cantero's application to Queen City in July, 1992, but he says late paperwork from Cantero and initial denials from Queen City caused delays.

But Jerry Casteel, manager of SBA loans at Queen City, said: "We got the file from Turkin's office in the beginning of May, 1993. We declined the loan on the sixth of May and that's it. We never looked at it again."

Casteel added: "It should have never gotten this far. These poor people should have been told on first contact that their application would not have qualified."

Justice Department records show that Turkin has a past felony conviction for grand theft in connection with fraudulent sales of travel packages. Turkin acknowledged that conviction.

Turkin has been operating Inter-Cal since 1986. He said he began packaging loans "strictly by accident."

He is one of a growing number of loan packagers in Southern California whose business has benefited with the booming volume of SBA-guaranteed loans nationwide, which now exceeds $6 billion annually.

Most experts agree that loan packagers can help, although individuals can also put together their own applications with the help of an accountant. The SBA, a federal agency, guarantees up to 90% of small-business loans that are funded by banks and other commercial lenders. The agency can generally guarantee up to $750,000 of a loan.

The SBA says it takes about 21 hours to put together all the financial statements, tax returns and other reports that go into an application. Analysts say banks and independent consultants who package SBA loans charge an average $500 to $1,500.

Frank Ures, chief executive officer at American Pacific State Bank in Sherman Oaks, the nation's sixth-largest generator of SBA loans, says flatly: "You don't need a (outside) packager because banks will assist you in putting together your package."

American Pacific has two employees who specialize in packaging SBA loans, and their maximum fee is $1,000. Other banks often refer candidates for SBA loans--after an initial screening--to outside consultants who package loans.

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