Ciena Capital, NY small business lender, agrees to pay $26.3 to settle False Claims Act allegations

by Ben Vernia | May 6th, 2010

On May 6, the Department of Justice announced a $26.3 million settlement with Ciena Capital LLC over allegations that the Small Business Administration lender violated the False Claims Act. According to DOJ’s press release:

The SBA, through various lending programs, provides financial assistance to small businesses by guaranteeing up to 85% of the value of loans made by private lenders. Today’s settlement resolves allegations that Ciena and BLC falsely certified that they complied with SBA regulations when they submitted claims for payment on loans they originated, underwrote, and serviced. Some of these loans defaulted shortly after they were made as a result of Ciena’s and BLC’s disregard of SBA rules, regulations, and underwriting requirements. Other loans were originated by former BLC Executive Vice President Patrick Harrington, or his office, during his tenure. Harrington pleaded guilty to conspiracy to defraud the United States and was sentenced to 10 years in prison for his prominent role in the fraudulent loan scheme, which included falsifying loan documents, inflating property appraisals, and using straw purchasers to engage in sham transactions. This settlement also resolves allegations that the defendants’ parent company, Allied Capital Corporation, is liable for the acts of its subsidiaries.

The case was originally brought as a whistleblower, or qui tam, action, by James R. Brickman and Greenlight Capital, who will receive $4.3 million, or 16.4% of the government’s recovery.

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