Bank CEO convicted of accepting bribes related to loans guaranteed by Small Business Administration | USAO-SDNY

Damian Williams, the United States Attorney for the Southern District of New York, today announced the conviction of EDWARD SHIN, then CEO of a Pennsylvania-based bank (the “Bank”), for accepting bribes in connection with making loans known by the bank guaranteed by the United States Small Business Administration (“SBA”). SHIN was arrested in May 2019 and accused of taking bribes by diverting a portion of commissions on SBA-backed loans and causing the bank to make SBA-backed and commercial loans to companies in which SHIN had a secret interest. The indictments are the result of a joint investigation by the Federal Deposit Insurance Corporation – Office of Inspector General (“FDIC-OIG”), Homeland Security Investigations (“HSI”), the SBA Office of the Inspector General (“SBA-OIG”) ) and the Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”). SHIN was convicted on all counts of the charges before US District Judge John P. Cronan in federal court in Manhattan.

According to the allegations in the criminal complaint, the indictment, and statements made during the Manhattan trial:

The SBA helps Americans start, build, and grow businesses by guaranteeing certain loans from banks to help those businesses thrive. Between 2009 and 2013, the bank offered a range of financial products, including SBA-guaranteed small business loans in the New York-New Jersey area, which the bank could only grant on the condition that all aspects of those loans comply with SBA regulations and SBA’s Standard Operating Procedures. Specifically, SBA rules and procedures prohibited bank officials, including SHIN, from receiving payments related to SBA-backed loans and prohibited banks from making such loans to institutions in which a bank official was involved.

Notwithstanding these regulations, SHIN, the bank’s CEO at the time, secretly solicited and received bribe payments related to SBA-guaranteed loans issued by the bank, prompting the bank to make SBA-guaranteed and commercial loans to companies in which SHIN secret property had interests. In particular, when the bank made business loans that did not involve the use of an actual broker, SHIN nevertheless arranged for its longtime friend, a real estate and loan broker (the “Broker”), to be unnecessarily inserted into the transaction, just to generate a brokerage fee , which could be shared with SHIN; In fact, the broker didn’t do any real work to earn commission on these transactions but shared the “brokerage fee” with SHIN as illegal commission.

SHIN also caused the bank to make SBA-guaranteed loans to companies in which it secretly retained an ownership interest, in violation of SBA rules and procedures. For example, in or about June 2010, the Bank made an approximately $950,000 SBA-guaranteed loan to a company in New York, New York. Although the documents presented to the bank to secure the loan made no mention of SHIN’s financial interests, the deal was secretly operated as a partnership between SHIN, the broker and another person. The loan eventually defaulted, ultimately resulting in a loss to the bank of approximately $591,278.60.

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SHIN, 58, of Ambler, Pa., was convicted on a charge of conspiring to commit bank fraud and wire fraud involving a financial institution that carries a maximum possible sentence of 30 years in prison, a charge of conspiring to commit bank bribery with a maximum sentence of five years in prison, one charge of conspiracy to commit credit fraud carrying a possible maximum sentence of five years in prison, another charge of conspiracy to commit bank fraud carrying a possible maximum sentence of 30 years in prison, and so on one for bank bribery and theft of funds by a bank teller, each carrying a possible maximum sentence of 30 years in prison. The maximum possible penalties in this case are prescribed by Congress and are provided here for informational purposes only, as the judge will decide the defendant’s conviction.

Mr. Williams commended the excellent investigative work done by the FDIC-OIG, HSI, SBA-OIG and SIGTARP.

This case is being handled by the Office’s Money Laundering and Cross-Border Criminal Enterprises Division. Assistant US Attorneys Tara La Morte, Anden Chow, Jessica Greenwood and Daniel M. Tracer are serving in the prosecution.

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