Pasadena Man Charged With Fraud in SBA ‘Loan Packaging’

A Pasadena businessman who helped entrepreneurs get U.S. Small Business Administration and other loans has been arrested as part of what SBA investigators describe as a series of schemes to defraud the SBA and local banks, causing millions of dollars in losses.

Kenneth Seychong Park, who worked primarily in the Korean business community, was arrested Thursday and charged with two criminal counts of submitting false documents to a federally insured financial institution. In a third count alleging money laundering, the government is seeking $520,000 in cash, property or other assets.

Investigators from the SBA and the Secret Service on Thursday searched Park’s Pasadena company, Kerob International, and removed eight boxes of photocopied documents. Park is free on $50,000 bond. Neither he nor his attorney returned a reporter’s telephone calls Friday.

“The investigation is continuing,” said Deborah Jones, special agent in charge of the local SBA Office of Inspector General. A preliminary hearing was set for May 22 in U.S. District Court in Los Angeles.

The case is the latest of many involving so-called loan packagers, officials said.

Loan packagers are paid a fee in exchange for their expertise in putting together loan application packages. They make up a largely unregulated industry, and one that has proved to be a continuing headache for the SBA and banks.

The SBA makes very few direct loans other than disaster loans. Instead, it guarantees loans made by financial institutions so that more risky borrowers can find the money to expand their businesses and buy equipment, among other things.

Although Park was charged with three violations of federal banking laws, documents filed with the criminal complaint describe the use of allegedly false documents in a series of loan transactions involving, at various times, the SBA, three banks and several Korean businesses.

An affidavit filed with the complaint by SBA Special Agent Teresa L. Price alleges that Park used false tax returns, phony cashiers checks and other fraudulent documents to induce banks to lend large sums of money to a variety of clients, most of whom defaulted on their loans. The loans totaled more than $4 million. In return, Park was paid substantial fees.

On Thursday, Park was accused of obtaining a $500,000 equipment loan in 1991 from Coast Bank for Soon Hye Kim, owner of KLG Sports Center of Los Angeles, by falsely telling the bank that the business had purchased $251,313 in equipment from United Equipment Co., a company owned by Park.

Park also submitted a document saying he was paid only $1,000 when he was actually paid $260,000 for his packaging services in a $1- million SBA-guaranteed loan, the complaint states. Soon Hye Kim defaulted on both loans within a year.

Price interviewed Kim in February and said, “Kim confessed that she was involved in a conspiracy with Park to commit bank fraud” through a series of plans developed after Kim fell behind in her rent payments at her business, the affidavit states.

The affidavit also details an application by Kim that was packaged by Park for an SBA disaster business loan of $414,800 to pay for, among other things, an outdoor golf practice range that was supposedly destroyed by rioters in 1992.

But an SBA disaster assistance officer discovered that a Coast Bank official had visited the business two weeks before the riots and had noted that the golf range had been removed to expand the parking lot. That loan was denied.

Kim did not return a telephone call from a reporter.

None of the 11 business people named in the affidavit was charged Thursday. Assistant U.S. Attorney Nathan Hochman declined to discuss whether the government plans to file more charges against Park or anyone else.

The SBA has recently developed guidelines to control loan packagers and will establish a procedure so that packagers cannot do business with the SBA until they have been screened and assigned a number.

The number will make it easier to track the activities of packagers and to trace unethical practices such as charging exorbitant fees, implying special influence and falsifying records.