Federal authorities have arrested an Orange County man on charges he arranged numerous fraudulent government-backed loans for unsuspecting Vietnamese businesses, a scheme that resulted in an estimated $3 million in losses and ultimately sparked an overhaul of small-business lending practices.
Thuy Vinh Le, also known as Tony Le, was apprehended earlier this month in Hawaii, where he has lived since 1990 when federal investigators began looking into a rash of loan defaults among Asian businesses in Southern California. Le is expected to be transferred today to authorities in Los Angeles, where he faces further criminal action.
Authorities said Le, 63, a former life insurance salesman who lived in Laguna Niguel, preyed primarily upon the Vietnamese immigrant community in Orange County. In the late 1980s, he prepared the paperwork for merchants to get SBA-backed loans, and then received kickbacks from clients of as much as $30,000, according to court papers.
Le allegedly falsified income tax returns and other documents, inflating his clients' income and assets so they could qualify for the loans. But at least 20 loans later defaulted, costing SBA-participating banks and taxpayers more than $3.2 million, said Deborah Jones, a special agent at the SBA inspector's office.
In a few cases, SBA officials believe, small business owners were aware they were breaking the law. But most of the borrowers were unsophisticated merchants who knew little of the American banking system and believed the kickbacks were part of doing business in this country.
"Tony Le was a major player in obtaining fraudulent loans from banks," said Assistant U.S. Atty. Nathan Hochman, who along with the SBA and FBI, investigated the case. Hochman said authorities have been searching for Le since 1990.
Le, a 20-year resident of the United States, was arrested on five counts of submitting false financial statements. Authorities said he was in the custody of the U.S. Marshal's Service Thursday. He faces a maximum of 20 years in jail on each count. He could not be reached for comment Thursday.
Federal officials characterized Le as the "grandfather" of the loan scheme because others learned the routine from him. For example, Le prepared an SBA loan for another Orange County man named Ty Huu Pham, who then struck out on his own as an SBA loan broker. Late last year, Pham pleaded guilty to several counts of bank fraud, and he awaits sentencing.
Under the SBA loan program, the federal agency guarantees up to 90% of loans made by private lenders. In recent years, the multibillion-dollar loan program has become a major source of financing in credit-tight Southern California. But in the early 1990s, the SBA was dogged by a surge in loan defaults, in large part because of unscrupulous loan brokers, officials say.
A number of business owners as well as other loan brokers have been arrested in recent months. But Le was the first case, and one of the largest, investigated by the SBA, setting off a nationwide crackdown on SBA loan fraud.
As a result of the investigation that began into Le's activities, the federal agency last year implemented a new policy requiring all loan applications to be checked against IRS tax returns.
Most of the loans that Le obtained for his clients were through Tustin-based Sunwest Bank, which federal officials said lost hundreds of thousands of dollars as the lender. Sunwest officials could not be reached Thursday for comment.
John Woodward, a former Sunwest executive who headed the bank's SBA department in the late 1980s, Thursday recalled Le. Woodward said his bank welcomed Le's business because he enabled Sunwest to reach an immigrant business community largely closed to traditional bankers.
"The unusual thing was that he dealt with a lot of people who didn't speak English," said Woodward.
Experts said Le received far more than the $2,000 that loan brokers and so-called packagers typically receive from the borrowers for putting together SBA loans.
"I'd say anything over $2,500 is pretty high," said Steve Stultz, a longtime Newport Beach consultant who has helped businesses obtain SBA loans.
In one case in 1989, Le prepared the paperwork that enabled the owner of Big Win International, a now-defunct Los Angeles import business, to obtain a $500,000 loan through Sunwest Bank.
According to court papers, Big Win's SBA loan application showed annual taxable income of about $100,000. IRS records later inspected by the SBA showed that firm's annual income was only one-fourth of that amount.
Big Win's owner, Benson Wai-Ying Pang, told the SBA that he paid Le $30,200 to prepare the application.
Pang said he contacted Le after reading an ad in the Vietnamese-language newspaper. Pang told the SBA that he had no idea that the financial documents were falsified, saying that he simply signed the paperwork at Le's direction.
Federal officials and others who knew Le said he appeared to live well, living in a large home in Laguna Niguel and driving around Little Saigon, the Vietnamese community in Westminster and Garden Grove, in a Mercedes.
Said SBA consultant Stultz: "I heard he made a lot of money."