Local businessman, James J. Laughlin, was sentenced in federal court for his role in an $18.2 million fraud scheme.
James J. Laughlin, 74, of Waynesville was recently sentenced in federal court to one year and one day for his part in an $18.2 million fraud scheme.
Don Ledford, spokesman for the U.S. Attorney's Office for the Western District of Missouri, told the Daily Guide Monday afternoon that U.S. District Judge M. Douglas Harpool sentenced Laughlin to one year and one day plus three years supervised release and ordered Laughlin to pay restitution.
"The court has not provided the amount yet," Ledford said of the restitution order.
Laughlin has been ordered to surrender himself on March 28, 2017 to begin serving his sentence.
The sentence came after Laughlin pleaded guilty in federal court back in May for making false statements and reports on a loan application. Laughlin, an operator of 4-J Apartments, admitted that he provided false information to the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) in order to obtain an $18,219,400 loan in 2012 for the operation and maintenance of 232 apartments and complexes in Pulaski County.
Laughlin was a co-defendant with Richard Newman Delong, 50, of Newburg. Delong was an employee of Brookshire Concrete and worked with Laughlin to make it seem as if Brookshire Concrete was renting apartments from 4-J Apartments.
The rental scheme allowed Laughlin to inflate the occupancy levels of the apartments in order to qualify for the FHA loan. The U.S. Attorney's Office reports that Delong forged checks from Brookshire Concrete to 4J Apartments, while no employees of the concrete company ever stayed there.
FHA and HUD required occupancy levels, in order to qualify for a loan, to be above 95 percent. The U.S. Attorney's Office reports that the "actual occupancy rate was only approximately 86 percent – below the level HUD and FHA set as a condition for approving the loan."
The 95 percent requirement is so that rental income is high enough to cover repayment of the loan. The U.S. Attorney's Office said that "by inflating occupancy rates with the fraudulent rental roll documents, it appeared that 4-J’s occupancy rate was 95.7 percent." Laughlin had been denied the loan in the past, but with the new numbers, HUD approved the loan.
In a past press release on the case, the U.S. Attorney's Office said, "Laughlin must forfeit to the government $18,219,400," however Ledford said the court has not provided an amount for restitution yet, but it is expected.
Delong got involved with Laughlin while awaiting sentencing on an unrelated fraud scheme involving defrauding the Small Business Association in the amount of $4.1 million.
Delong was a former vice president and chief lending officer of a Mid-America Bank in Dixon before he came to work at Brookshire Concrete. Between Jan.1, 2005 and Feb. 5, 2010, the U.S. Attorney's Office says Delong led a fraud scheme meant to defraud the Small Business Association by obtaining loans from Mid-America Bank that were guaranteed by the SBA under federal loan programs that are meant to provide assistance to small businesses that qualify.
"A number of loans were fraudulently obtained by businesses that were ineligible to receive them by concealing past due loan payments of distressed borrowers; making loans to nominee borrowers; making false entries in bank records; structuring loans so as to avoid the scrutiny of the bank’s board of directors; concealing unbooked letters of credit; funneling SBA guaranteed loan proceeds to themselves and others; misapplying loan proceeds; preparing fraudulent SBA borrower applications; and paying and accepting bribe money to secure loans," the U.S. Attorney's Office said in a press release on the subject.
DeLong was sentenced to three years in prison without the possibility of parole and ordered to pay $4,222,916 in restitution to the Small Business Administration, $1,257,327 to Mid-America Bank and Trust Company, $1,674,696 to Chubb Insurance, and $98,000 to Brookshire Concrete.
This case was not investigated locally and was handled by the Federal Bureau of Investigation (FBI) and the Department of Housing and Urban Development, Office of the Inspector General.