O.C. Man Arrested in Loan Fraud Scheme : Crime: The suspect is accused of preying upon businesses owned by Vietnamese. The SBA was forced to change its practices.

Federal authorities have arrested an Orange County man who allegedly arranged numerous fraudulent government-backed loans for unsuspecting Vietnamese-owned businesses, causing millions of dollars in losses and forcing the Small Business Administration to change its loan practices.

Thuy Vinh Le, also known as Tony Le, was apprehended earlier this month in Hawaii, where he has lived since 1990, the same year federal investigators began looking into a rash of loan defaults among Asian businesses in Southern California. Le is expected to be transferred todayto authorities in Los Angeles, where he faces further criminal action.

Authorities said Le, 63, a former life insurance salesman who lived in Laguna Niguel, preyed primarily upon the immigrant Vietnamese community in Orange County.

In the late 1980s, he prepared the paperwork for merchants to get SBA-backed loans, then received kickbacks from the client of as much as $30,000, according to court papers.

Le allegedly falsified income tax returns and other documents, inflating his clients’ income and assets so they could qualify for the loans.

But at least 20 loans later defaulted, costing SBA-participating banks and taxpayers more than $3.2 million, said Deborah Jones, a special agent at the SBA inspector’s office.

In a few cases, SBA officials believe, small-business owners were aware they were breaking the law.

But most of the borrowers were unsophisticated merchants who knew little about the U.S. banking system and believed the kickbacks were part of doing business in this country.

“Tony Le was a major player in obtaining fraudulent loans from banks,” said Assistant U.S. Atty. Nathan Hochman, who investigated the case along with the SBA and FBI. Hochman said authorities have been searching for Le since 1990.

Le, a 20-year resident of the United States, was arrested on five counts of submitting false financial statements. Authorities said Thursday that he is in the custody of the U.S. Marshal’s Service. He faces a maximum of 20 years in prison on each count. He could not be reached for comment Thursday.

Federal officials characterized Le as the grandfather of the loan fraud scheme because others learned the routine from him. For example, Le prepared an SBA loan for another Orange County man named Ty Huu Pham, who then struck out on his own as an SBA loan broker.

Late last year, Pham pleaded guilty to several counts of bank fraud, and he awaits sentencing.

Under the SBA loan program, the federal agency guarantees up to 90% of loans made by private lenders. In recent years, the multibillion-dollar loan program has become a major source of financing in credit-tight Southern California. But in the early 1990s, the SBA was dogged by a surge in loan defaults, in large part because of unscrupulous loan brokers, officials say.

A number of business owners as well as other loan brokers have been arrested in recent months. But Le was the first case, and one of the largest, investigated by the SBA, setting off a nationwide crackdown on SBA loan fraud.

As a result of the investigation that began into Le’s activities, the federal agency last year implemented a new policy requiring all loan applications to be checked against IRS tax returns.

Most of the loans that Le obtained for his clients were through Tustin-based Sunwest Bank, which federal officials said lost hundreds of thousands of dollars as the lender.

John Woodward, who headed Sunwest’s SBA department in the late 1980s, said Thursday that his bank welcomed Le’s business because he enabled Sunwest to reach an immigrant business community largely closed to traditional bankers.

“The unusual thing was that he dealt with a lot of people who didn’t speak English,” Woodward said.

Experts said that Le received far more than the $2,000 that loan brokers and so-called packagers typically receive from the borrowers for putting together SBA loans.

“I’d say anything over $2,500 is pretty high,” said Steve Stultz, a longtime Newport Beach consultant who has helped businesses obtain SBA loans.

In one case in 1989, Le prepared the paperwork that enabled the owner of Big Win International, a now-defunct Los Angeles import business, to obtain a $500,000 loan through Sunwest Bank.