Feds indict 3 locals

Published 12:00 am Saturday, November 20, 2010

South Central Agency’s owner Harold Young says it’s business as usual. | Andrew Garner/Star-News

A federal grand jury in Pennsylvania indicted three local businessmen Thursday for their part in allegedly stealing $53 million in a massive loan fraud scheme.

John Tomberlin and Harold Young, both associated with Andalusia’s South Central Agency, and John Wiley Spann, a logging equipment dealer, are alleged to have participated in the fraud at the request of officials with Sterling Financial Corp’s Equipment Finance LLC, based in Pennsylvania.

The 15-count indictment accuses the three and five other defendants in Pennsylvania of mail fraud, money laundering and conspiracy in a six-year scheme where they falsified EFI’s books and looted its accounts, causing $53 million in losses.

The three also were ordered to forfeit $1,041,452.92.

The announcement was made late Thursday afternoon by the U.S. Attorney’s Office in Pennsylvania.

Michele Rajsic of the U.S. Attorney’s Office, Eastern District of Pennsylvania, said Friday the three men have not been taken into custody nor have they appeared in court on the charges and would not comment further on the investigation. According to the indictment, EFI was a logging industry lender that provided financing for the purchase of forestry and land clearing equipment, primarily in the southeastern United States. From the time the company was acquired by Sterling Financial in March 2002, until April 2007, the value of EFI’s loan portfolio grew on paper from approximately $80 million to approximately $330 million. The indictment states that as far back as 2001, all eight defendants were engaging in a systematic fraud at EFI. The indictment alleges that Spann and Tomberlin, acting at the direction of EFI’s senior vice presidents Joseph M. Brass and Michael J. Schlager, inflated the company’s profitability by creating numerous bogus loans.

Some of those loans were allegedly in the name of borrowers who were fictitious, dead, to those not in the logging business, or in the names of borrowers who didn’t know about the loans and did not purchase equipment. The indictment also alleges that Spann helped EFI officials initiate hundreds of loans in the six-year period. Of those, 85 percent were allegedly bogus. For his “services,” the indictment reported Spann paid himself an annual salary using the EFI money.

In order to give the appearance of legitimacy to the bogus loans, the defendants filed company files with false records, which included documentation that falsely showed the equipment was insured and bogus insurance premium invoices.

Other points of the indictment include, that during in or about January 2001 to April 2007:

• Spann took approximately $80,000 to $100,000 per year from EFI as “compensation” for helping to orchestrate the EFI loan fraud scheme.

• Spann paid approximately $2 million to people in exchange for their services in creating bogus loans. Payments were funded with the proceeds of bogus loans.

• Spann recruited Tomberlin to sign EFI loan paperwork that listed Tomberlin as the borrower for a $124,000 loan, when in truth, Spann paid Tomberlin $10,000 to sign the false loan documents claiming Tomberlin had purchased logging equipment that he did not buy.

The indictment states that, at the suggestion of Schlager, Spann recruited Young and Tomberlin to help him raid EFI’s insurance escrow account of more than $1 million by preparing false SCA invoices for insurance premiums. In exchange for their cooperation, Tomberlin and Young were reported to have kept approximately 20 percent of the funds.

Specifically, the indictment lists 25 false invoices issued by the South Central Agency to EFI in amounts ranging from $11,000 to $72,134.

If convicted, the U.S. Attorney’s Office will seek forfeiture of the $53 million from the defendants.