Prosecutors Send Request to Allied Capital

Allied Capital Corp., a lender to private companies that plan to go public, said Monday that federal prosecutors had requested information about the company and its Business Loan Express unit in connection with a criminal probe.

Allied announced the probe six months after it said the Securities and Exchange Commission had launched its own informal investigation of the company.

Shares of Allied fell $2.63 to $25.61 on the New York Stock Exchange.

Allied, based in Washington, said the inquiry by the U.S. attorney for the District of Columbia “appears to pertain to matters similar to those allegations made by short sellers over the past 2 1/2 years.”

Short sellers profit from falling stocks by selling borrowed shares and then buying shares at lower prices to return them to lenders. Short sellers have accused Allied of overvaluing its investments.

In June, Allied said the SEC was probing the 2003 transfer to Allied’s balance sheet of $9 million in loans once held by Business Loan Express, a lender to small businesses. The SEC also asked about other companies in Allied’s portfolio.

Allied said it was complying with the U.S. attorney’s request, which was made in letters received Wednesday. It previously said it was complying with the SEC investigation. A lawyer for the company did not return a call seeking comment.