Former Car Wash Owner Indicted for Mortgage Fraud and for Fraudulently Obtaining $3.5 Million in Small Business Administration Loans
|U.S. Attorney’s Office March 09, 2012|
PHOENIX—Joseph N. Gagliano, 43, of Scottsdale, Arizona, was arraigned on March 7, 2012 on a seven-count indictment charging three counts of bank fraud in violation of Title 18 U.S.C. § 1344, one count of wire fraud in violation of Title 18 U.S.C. § 1343, and three counts of false loan and credit applications in violation of Title 18 U.S.C. § 1014. Gagliano entered pleas of not guilty to all charges.
Ann Birmingham Scheel, Acting U.S. Attorney for the District of Arizona, spoke of the significance of this indictment when she said, “SBA loans are intended to provide qualified small business owners access to capital to finance and grow their businesses. When SBA loans are procured through fraud, deserving small business owners are effectively denied business opportunities. The United States Attorney’s Office will continue to aggressively investigate and prosecute those who fraudulently attempt to obtain financial assistance through SBA’s guaranteed loan programs. I would like to thank the SBA OIG and the FBI for their thoroughness and dedicated professionalism throughout this investigation.”
“Corrupt borrowers who attempt to defraud SBA’s loan programs will be aggressively pursued by our office,” said SBA Inspector General Peggy E. Gustafson. “This successful investigation and indictment demonstrates our commitment to insuring that SBA loans are only disbursed to deserving small businesses helping to grow our economy. We appreciate the leadership of the U.S. Attorney’s Office and the support of the FBI to bring this indictment forward.”
“This case is the culmination of a joint investigation by the Small Business Administration Office of Inspector General and the FBI,” said FBI Special Agent in Charge James L. Turgal, Jr., Phoenix Division. “When an individual allegedly seeks to line his own pockets through deceptive practices, it takes away needed capital from legitimate small business owners. The FBI and our law enforcement partners are dedicated to investigating and prosecuting those individuals who commit fraud against the government and seek to harm our economy.”
The indictment alleges that, between June 2006 and August 2010, Gagliano falsely represented that his father was applying for loans and loan modifications for two residential properties located in Scottsdale and Phoenix because Gagliano would be unable to obtain, or would have difficulty obtaining, the requested loans and loan modifications for himself. Gagliano allegedly submitted, in his father’s name, loan applications and requests to modify loans that contained false information regarding his father’s income, assets, liabilities, and his intent to occupy the properties as his primary residence. Gagliano also allegedly submitted false information to lenders regarding his father’s ownership interests in car wash ventures that Gagliano actually owned.
Additionally, the indictment alleges that Gagliano sought SBA loans for a carwash located in Chandler. In obtaining the loans, Gagliano allegedly used his father’s name and misrepresented his father’s ownership interests in car wash ventures that Gagliano actually owned. Gagliano also allegedly misrepresented on the SBA loan applications that his father had injected nearly $1.5 million in personal cash into the construction of the car wash, that his father had a personal net worth in excess of $1.5 million and assets valued at just under $4 million, and that his father would be the primary on-site manager of the car wash. The indictment alleges that, based on Gagliano’s false representations, Gagliano obtained in excess of $3.5 million in SBA loans.
Those SBA loans went into default, resulting in substantial losses to the lenders and to the SBA.
An indictment merely alleges that crimes have been committed. The defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Gagliano faces a potential maximum penalty of 30 years in prison for each count. Gagliano is also subject to fines and mandatory restitution if convicted.
The investigation in this case was conducted by the Small Business Administration, Office of Inspector General and the Federal Bureau of Investigation. The prosecution is being handled by Kevin M. Rapp Assistant U.S. Attorney, District of Arizona, Phoenix.