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Feds Lift Seal on $80M Fraud Conspiracy Against American Banks

Federal prosecutors say they have cracked a conspiracy that defrauded American banks of more than $80 million as part of a scheme that left the Import-Export Bank of the United States holding the tab for $42 million.

The Export-Import Bank is an independent agency of the U.S. government's executive branch and acts as an official export credit bureau. The Ex-Im Bank guarantees or insures loans by U.S. banks and other lenders to foreign companies that import American products.

At least some of the U.S. banks alleged to be the victims of the $80 million conspiracy apparently conditioned their loans to the foreign businesses on Ex-Im Bank guarantees.

The Ex-Im Bank will only issue loan guarantees if a U.S. exporter certifies in loan documents that the goods were made in the United States and shipped to a foreign country.

Bogus exporter certifications are a key element of the alleged fraud conspiracy, Washington federal court records say.

According to a statement by the Justice Department, eight co-conspirators allegedly defrauded various banks in the United States through fraudulent loan applications and supporting documents from October 1999 to June 2005.

The statement and recently unsealed criminal filings in the U.S. District Court for the District of Columbia revealed the conspiracy and an ongoing federal probe of the alleged loan fraud.

Court records did not identify most of the U.S. banks and lenders. However, several were named in the filings: First International Bank, US Bank, UPS Capital Business Credit, Guaranty Bank of California and East West Bank of California.

The loans totaling $80 million were purportedly for the export of American goods to companies controlled by conspirators in the Philippines.

The fraud allegedly included fake shipping documents that showed several defendant exporters sent American products to Philippines companies. Any goods actually shipped had little or no value, according to court records.

Federal prosecutors said the Philippines conspirators kept the money and defaulted on the loan notes. The Ex-Im Bank then stepped in and made good on the defaults, paying out at least $42.7 million to lenders, according to court filings.

The court unsealed criminal cases against three U.S. exporters Oct. 9. Prosecutors said all three defendants have each pleaded guilty to one count of conspiracy and one count of mail fraud.

Prosecutors identified them as Daniel Curran, 52, of Boynton Beach, Fla.; Edward Chua, 55, of Montebello, Calif.; and David Villongco, 51, of San Mateo, Calif. The men allegedly got at least 1 percent or 2 percent of the loan amounts as payment.

Curran and his company Dankim Trading Co. allegedly helped the foreign conspirators obtain $30 million from unspecified lenders, according to a criminal information filed against him.

Court records say $24 million was misappropriated, the loans went into default and the Ex-Im Bank paid out $18 million to the defrauded lenders.

Chua, through his exporting businesses EMMCCO and ECCCO, also allegedly helped the Philippines conspirators defraud American lenders.

In his case, $10 million was loaned, all the money was misappropriated, the loans defaulted and the Ex-Im Bank reimbursed the lenders $9 million.

Villongco and his company PBJ Venture International Corp. allegedly helped the conspirators in the Philippines take U.S. lenders for $20 million.

The criminal information filed against him says $16 million was misappropriated, and the Ex-Im Bank ended up paying unidentified lending banks $9.2 million when the loans defaulted.

Prosecutors said Curran and Chua face up to 30 years in prison, and Villongco could draw a maximum 40-year sentence.

Cases against two other conspirators were unsealed Oct. 5. Federal prosecutors identified the defendants as U.S. freight shipper Jaime Galvez, 51, of Redondo Beach, Calif., and U.S. exporter Robert Delgado, 46, of Fremont, Calif.

Galvez allegedly destroyed 35 shipping invoices made out to Dankim Trading in the face of a federal grand jury subpoena. He also allegedly lied to the grand jury investigating the Philippines product-export bank frauds.

Galvez pleaded guilty to one count of destroying records in a federal investigation and one count of perjury. He faces a maximum 25 years in prison.

Delgado allegedly used his company Global Resources Group to help misappropriate $2.1 million in loan proceeds. He pleaded guilty in November 2006 to one count of conspiracy and one count of mail fraud and was later sentenced to two years in prison and ordered to make $1.9 million in restitution, prosecutors said.

A day before the cases against Galvez and Delgado were unsealed, federal agents filed a criminal information against another U.S. exporter, Christina Song, 49, of Whittier, Calif.

She is charged with conspiracy and mail fraud for helping conspirators in the Philippines defraud U.S. banks of $17 million. As in the other cases, the loans went into default, and the Ex-Im Bank ended up paying the lenders, in her case $9.5 million.

One of the alleged Philippines conspirators is Marilyn G. Ong, 51, a Manila loan broker, according to an indictment filed against her in the federal court.

Ong is accused of brokering $40 million in U.S. loans to Philippines shell companies she controlled, allowing the loans to default and then keeping the money.

The indictment says defendant exporter Curran is married to Ong's niece and that defendant exporter Chua is Ong's cousin.

A second defendant named in the indictment is Ong's nephew, Ildefonso Ong Jr., 41, of Manila. He also goes by the name Long Ong.

The Ongs are each charged with one count of conspiracy, four counts of making false statements on bank loan documents, four counts of mail fraud, nine counts of money laundering and one count of obstructing an Ex-Im Bank probe of the loan defaults.

They face maximum sentences of more than 100 years if convicted on all counts.

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