A settlement has been reached in a whistleblower class action lawsuit brought against Ciena Capital LLC and a subsidiary, Business Loan Center (BLC). They are accused of submitting false claims for payment on loans made through the Small Business Administration (SBA).
The settlement for $26.3 million, which includes a credit for $18.1 million previously negotiated by andpaid to the SBA. The whistleblowers will receive $4.3 million as their share of the government’s recovery.
The original case was filed in 2004. The United States alleged Ciena and BLC falsely certified that they complied with SBA regulations when they submitted claims for payment on loans they originated, underwrote, and serviced. Some of these loans defaulted shortly after they were made as a result of Ciena’s and BLC’s disregard of SBA rules, regulations, and underwriting requirements. Other loans were originated by former BLC Executive Vice President Patrick Harrington, or his office, during his tenure. Harrington pleaded guilty to conspiracy to defraud the United States and was sentenced to 10 years in prison for his prominent role in the fraudulent loan scheme, which included falsifying loan documents, inflating property appraisals, and using straw purchasers to engage in sham transactions. This settlement also resolves allegations that the defendants’ parent company, Allied Capital Corporation, is liable for the acts of its subsidiaries.
