By Carol S. Remond OF DOW JONES NEWSWIRES A former executive at one of Allied Capital Corp.'s (ALD) subsidiaries was sentenced to 10 years in prison Thursday for defrauding the U.S. Small Business Administration.
Patrick J. Harrington, who headed up Business Loan Express LLC's office in Troy, Mich. was indicted in January 2007 with several other state residents on charges that they defrauded SBA out of $77 million in guaranteed loans.
Harrington who was indicted in the U.S. District Court for the Eastern District of Michigan, Southern Division, later pleaded guilty to fraud and making false statements to a grand jury.
In addition to his imprisonment, Harrington was also ordered to pay about $34 million in restitution, the bulk of which would go to his former employer.
BLX at the time of Harrington's indictment was the largest holding of Allied Capital, a Washington, D.C. buyout firm. The small lender was renamed Ciena Capital LLC in January, a few months after a U.S. Senate Committee overseeing the SBA held a hearing on its handling of loans originated by BLX. The hearing followed the publication of a report critical of SBA's handling of those loans.
Ciena Capital filed for bankruptcy protection on Sept. 30, listing SBA as its largest unsecured creditors with some $1.8 million owed to the agency.
The SBA is an independent agency within the executive branch created in 1953 to encourage the development of small businesses by guaranteeing certain loans made to them. SBA typically guarantees 75% of the loans issued by small lenders like BLX.
-By Carol S. Remond, Dow Jones Newswires; 303-997-5783; carol.remond@dowjones.com)
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(END) Dow Jones Newswires
November 13, 2008 17:41 ET (22:41 GMT)

Publié le 13 novembre 2008 Copyright © 2008 Dowjones