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6 Charged in SBA Loan Application Fraud

October 18, 1994|DON LEE | TIMES STAFF WRITER

A Pasadena banker and a former Westminster loan broker were among six people charged Monday in an alleged scheme to falsify Small Business Administration loan applications, leading to a rash of defaults.

The banker, Michael Mahoney, 29, was charged in federal court in Los Angeles with accepting kickbacks of $35,477 in 1990, most of it from broker Ty Huu Pham, 56. Four individual borrowers were also charged.

It was the second batch of criminal actions stemming from a three-year probe by the SBA and FBI of widespread fraudulent loan applications in Southern California.

Pham allegedly paid Mahoney, then a loan officer at the Bank of Industry, for recommending approval of about 20 SBA loan applications that Pham put together. Twelve of those loans have since gone into default at a cost of about $2 million to taxpayers.

Mahoney, who for the last two years has been vice president and head of the SBA lending department at Citizens Bank in Pasadena, did not return calls Monday. But at Monday's arraignment, his attorney, James Riddet, indicated that his client would plead guilty today. Mahoney faces up to 30 years in prison and $1 million in fines.

Pham, 56, is expected to plead guilty next month to three counts of bank fraud, according to Nathan Hochman, the assistant U.S. attorney in Los Angeles who brought the charges against Pham and Mahoney. Pham faces a maximum 90 years in prison and $3 million in fines.

"It was a collusive effort on all their parts, and the government was a big loser here," said Steve Marica, assistant inspector general for the SBA in Washington.

SBA officials said they looked at 24 loans Pham helped clients acquire and that 16 of those loans have failed, costing banks and the SBA more than $3 million.

Two months ago, a federal grand jury indicted six borrowers on charges of making false statements to obtain about $1 million worth of SBA loans. At the time, investigators said five of those borrowers went to the same Westminster loan packager, but officials did not identify him as Pham until Monday.

Criminal charges were also filed Monday against four additional borrowers who allegedly obtained a total of $720,000 in fraudulent business loans with Pham's help. All of those loans have since failed.

The four borrowers charged Monday are Dinh Nguyen, who operated a clothing business in Orange County and now lives in Seattle; Thuan Phuc Nguyen, who had a liquor store in Lake Elsinore, and Alan Nam Nguyen and Jeannie Trinh Luong, an Irvine couple who had a trading firm in Garden Grove.

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