The Iowa CFO who allegedly conspired with others to defraud the Small Business Administration has been identified in court records as Michael Barry Slater of Des Moines.
Slater is the Founder and Chairman of Vital Financial Services, a Clive-based loan services provider. He pleaded guilty this week to conspiracy to commit wire fraud shortly after a federal indictment against him was made public.
Sentencing is scheduled for March 15, 2022. Slater faces a sentence of up to 30 years in prison and fines of over $ 1 million.
According to court records, Vital Financial Services created, conditioned and disbursed liquidated loans that had been guaranteed by the Small Business Administration on behalf of banks and other lending institutions. Although Vital has helped its client banks – mostly small federally insured lenders located in the Midwest – obtain SBA loan guarantees, federal regulations state that SBA-backed loans cannot be used. to refinance the debt simply to shift the risk of default from the lender to the SBA.
One of Vital’s client banks was the now-closed Valley Bank located in the Illinois Quad-Cities and headed by President and Chairman Larry Charles Henson, who was recently indicted and pleaded guilty to wire fraud charges. . Henson is expected to be sentenced on March 8, 2022.
Henson’s indictment details Slater’s role in the scheme, but identifies him only as “Co-Conspirator # 1.” With the indictment against Slater unsealed this week, he was revealed to be Co-Conspirator No.1.
The new indictment accuses Slater of conspiring with Henson and Vital employees to commit wire fraud involving three loans.
According to prosecutors, Slater worked with Henson and other Valley Bank employees to design these loans so that borrowers appear to qualify for SBA guarantees. To do so, they reportedly completed loan guarantee applications that included false statements regarding both the borrowers’ eligibility to receive the loans and the eventual disbursement of the loan proceeds.
For example, in September 2011, Valley Bank reportedly attempted to evade any risk associated with a $ 5 million loan it made to a Kentucky-based company that was heavily in debt and had limited capital.
Slater reportedly advised Henson to “do everything possible to ensure that the borrower is not more than 29 days late” in payments to ensure that his request for refinancing the SBA-backed loan would be approved. – even if that meant having a grant from Valley Bank. the borrower has a 90-day deferral of payment. Slater also allegedly called Henson and suggested various ways the bank could fraudulently conceal from the SBA the fact that a loan was in danger of defaulting.
Shortly after, Slater called Valley Bank vice chairman Andrew Erpelding to warn him that the loan could not be refinanced by the SBA due to past overdue payments. Erpelding reportedly called Henson and told him about the issue, after which the pair jointly called Valley Bank Vice President Susan McLaughlin, asking her to change the bank’s loan repayment reports.
McLaughlin reportedly complied, altering the borrower’s payment history to eliminate any overdue payments. The bank, along with Slater, then forwarded the falsified information to the SBA as part of the refinancing request.
At that time, the SBA rejected Valley Bank’s request to refinance a $ 4.6 million loan involving a Florida company, pointing out that the borrower was already guarantor of two other defaulting SBA loans. Slater would then have submitted a new loan application, this time identifying the borrower only using an acronym of the borrower’s real name.
Slater then emailed Erpelding and explained to him that the bank would have to ‘rewrite’ their loan documents to put them all in the fictitious name used on the SBA app and then make sure there was no had no overdue payments referenced in these documents. The SBA approved the falsified application and the borrower ultimately defaulted, leaving the federal agency in charge of $ 2.1 million.
A third loan, also backed by false documents, resulted in default and the SBA suffered losses of $ 3.4 million.
Erpelding was charged in October with conspiracy to commit wire fraud, but the indictment was only recently released. He is due to be sentenced on February 15, 2022.
Court documents say McLaughlin has also been indicted and prosecutors said in a press release that she pleaded guilty to wire fraud. Despite an order of November 12 unsealing the case, all documents in the case remain inaccessible to the public. His conviction appears to be scheduled for February 15, 2022.