TD Bank tool case

…devised a scheme to secretly make income projections to TD and other SBA lenders that would only be disclosed to the SBA lender,” in order to satisfy the bank’s lending criteria, the suit alleges. Matco established the system to grow its franchise business, and Commerce Bank officials rubber-stamped the SBA loans because it allowed the bank to collect interest on the doomed debt until it eventually imploded, the suit claims. The bank turned a blind eye to the inflated projections, according to the suit, because SBA loans are guaranteed by the government with as much as 90 percent of the losses covered.

New York Post
November 15, 2011

TD Bank tool case
Suit alleges small-biz loan scheme
Mark DeCambre

Matco.jpg

Matco Tools franchisees allege they were victims of a financial fraud involving the company, a unit of Danaher Corp, and its lender, Commerce Bank. Alamy

Small business loans may be Wall Street’s new cesspool.

A suit filed yesterday in New Jersey federal court alleges that TD Bank and franchise distributor Matco Tools were complicit in underwriting hundreds of fraudulent small business loans over a four-year period dating back to 2003.

In their suit, David Villano III and his father, David Villano, Jr., claim that Matco, a subsidiary of publicly traded Danaher Corp., and TD Bank established a scheme to dupe “unsophisticated borrowers” into signing loans that were destined to fail.

The suit alleges that Matco doled out inflated annual performance projections to Cherry Hill, N.J.-based lender Commerce Bank, which was acquired by TD four years ago, in order to get a Small Business Administration loan approved.

“Matco’s upper management … devised a scheme to secretly make income projections to TD and other SBA lenders that would only be disclosed to the SBA lender,” in order to satisfy the bank’s lending criteria, the suit alleges.

Matco established the system to grow its franchise business, and Commerce Bank officials rubber-stamped the SBA loans because it allowed the bank to collect interest on the doomed debt until it eventually imploded, the suit claims.

The bank turned a blind eye to the inflated projections, according to the suit, because SBA loans are guaranteed by the government with as much as 90 percent of the losses covered.

Loans to Matco franchisees had an unusually high default rate of 37 percent at the time that one of the plaintiffs’ loans was underwritten in 2004, according to the suit.

“It’s unfortunate that SBA loans, which are designed to assist aspiring entrepreneurs and benefit the economy generally, could be used for such deceitful purposes,” said Jerry Marks, an attorney at Marks & Klein representing the Villanos.

A spokeswoman for TD declined to comment, and a Danaher representative could not be reached.

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http://www.nypost.com/p/news/business/td_bank_tool_case_LFdZzYpQKpxieyeMSf6OMP


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Risks: Able to finance and sell negative cash flow franchise on crooked appraisals, Liar Loans, Class action lawsuits benefit lawyers, not franchisees, Class action only as good as the lawyers involved, Class-action lawsuits: lawyers take majority of risks & spoils, Conspiracy, Conspiracy to commit fraud, Conspiracy to market and sell a doomed to failure franchise, Deceit, Fraud, Fraudster banker, Fraudster franchisor, Fraudulent misrepresentation, Fraudulently inflated franchisee revenue figures, Government guaranteed loan program very attractive to fraud, Government guaranteed loans, Government guaranteed loans, massive loan defaults, Government guaranteed loans: program loses $1, franchisee families lose $10, Loan pushing, Moral Hazard: a party insulated from risk behaves differently than if the full risk were present, Overstatement of sales and profits, Predatory franchise lending, Symbiotic relationships (industry, banks, lawyers), TD Canada Trust, The game is rigged, Unsophisticated buyers, U.S. Small Business Administration, SBA, Why should we care? It's not our money., United States, 20111115 Td bank

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