NEW YORK, Sept 18 (Reuters) - Saba Inc, a Memphis, Tennessee-based exporter, has agreed to pay $3.5 million to settle U.S. charges that it committed fraud in obtaining a loan guaranteed by the Export-Import Bank of the United States to finance construction of a retirement complex in western Turkey.
The U.S. Department of Justice said on Thursday that Saba admitted, and accepted responsibility for, misleading Deutsche Bank and the Ex-Im Bank about how much of the $38.1 million loan would be spent on “local costs” and whether the retirement complex developer would make a down payment, without verifying the information.
It also said Saba marked up the cost of U.S.-made goods being exported to the developer, sometimes by 300 percent, with excess funds being funneled to co-defendant Hasan Besneli, a Turkish businessman working on the project in Urla, Turkey.
The developer, Darussafaka, defaulted on the loan in 2007, exposing the Ex-Im Bank to losses after it reimbursed Deutsche Bank under the guarantee, the Justice Department said.
As part of the settlement, Saba agreed not to participate in any Ex-Im loans or loan guarantee programs for seven years.
“The Export-Import Bank is charged with promoting export of U.S.-made goods,” U.S. Attorney Preet Bharara in New York said in a statement. “It is absolutely unacceptable for exporters and business agents to undermine that mission by misrepresenting how proceeds from loans guaranteed by Ex-Im will be used.”
Besneli, a U.S. citizen now living in Turkey, remains a defendant in the lawsuit, which seeks penalties under the federal Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and False Claims Act.
Saba’s lawyer did not immediately respond to requests for comment. A lawyer for Besneli could not immediately be located.
Some conservative groups have called on lawmakers to close the Ex-Im Bank, whose charter expires on Sept. 30. They see the 80-year-old trade finance agency as a symbol of big government and wasteful lending.
The U.S. House of Representatives passed a stopgap spending bill on Wednesday that would extend the agency’s charter through June 30, 2015.
The case is U.S. v. Besneli et al, U.S. District Court, Southern District of New York, No. 14-07339. (Reporting by Jonathan Stempel in New York; Editing by Peter Galloway)