The founders and three other former officers and employees of Westfield-based Banc-serv Partners LLP have been indicted in connection with what federal prosecutors describe as a 13-year-long conspiracy to defraud the Small Business Administration.
According to a Department of Justice news release issued Friday afternoon, an indictment unsealed on Friday alleges that “the defendants and their co-conspirators originated dozens of loans, totaling over $10 million in disbursements, which were not eligible for SBA guarantees.”
IBJ was unable to secure a copy of the indictment late Friday.
Defendants are Banc-serv’s cofounder and former president and CEO, Kerri Agee, also known as Kerri Agee-Smith, 43, of Noblesville; cofounder Matthew Smith, 50, of Westfield; former Chief Operating Officer Kelly Isley, 38, of Westfield; former Chief Marketing Officer Chad Griffin, 46, of Carmel; and former employee Nicole Smith, also known as Nicole Smith-Kelso, 42, of Indianapolis.
Banc-serv, established in 2002, provided consultation and outsourcing services for small-business lenders who made SBA loans.
FBI officials showed up to search the company’s office at 777 E. Main St. in October 2017, but at the time the agency would not say why. The company’s website at that time described it as having 40 employees who worked with more than 400 lending partners in 45 states.
The defendants are alleged to have “fraudulently obtained guarantees for loans that the SBA had deemed ineligible.” They are also accused of hiding signs of ineligibility from the SBA by “knowingly misrepresenting the use of SBA loan proceeds and unlawfully diverting previously denied loan applications into expedited approval channels,” the news release says.
Matthew Smith left Banc-serv around the end of 2005 and founded a non-bank lending company. The indictment accuses him of knowingly causing fraudulent loan applications prepared by Banc-serv, along with guarantee requests, to be sent to the SBA.
All five defendants were charged with one count of conspiracy to commit wire fraud affecting a financial institution and one count of conspiracy to make false statements in loan-guarantee applications and purchase requests.
Several defendants were also charged with at least one additional offense.
Agee was also charged with four counts of wire fraud and seven counts of making false statements in loan-guarantee applications and purchase requests.
Isley was also charged with three counts of wire fraud and four counts of making false statements in loan-guarantee applications and purchase requests.
Griffin was also charged with one count of making false statements in loan-guarantee applications and purchase requests.
Nicole Smith was also charged with three counts of wire fraud and four counts of making false statements in loan-guarantee applications and purchase requests.
Reached by phone Friday, Agee, Griffin and Nicole Smith declined to comment. Isley did not immediately return a phone message, and IBJ was unable to reach Matthew Smith by phone.
Lake Success, New York-based Newtek Business Services Corp. acquired Banc-serv in June 2016 for $5.4 million.
In a public disclosure statement filed late Friday with the U.S. Securities and Exchange Commission, Newtek said Banc-serv no longer has any employees.
Starting last year, Banc-serv customers were given the chance to switch to another Newtek-owned company, and most of those customers have done so, the company said.
Newtek also said it hired an attorney to do an outside investigation of the matter following the FBI search, and the company believes that the defendants’ alleged activities took place before Newtek acquired Banc-serv.
The FBI, as well as the offices of inspector general at both the SBA and the Federal Deposit Insurance Corp. investigated the case.