Geoffrey Berman, U.S. attorney for the Southern District of New York. Photo: John Taggart/Bloomberg

Noah Bank CEO Edward Shin was arrested and charged by the office of U.S. Attorney Geoffrey Berman of the Southern District of New York for allegedly directing the bank to issue federally backed loans aimed at helping small businesses that went to companies in which Shin had secret interest.

Shin, a Pennsylvania resident whose bank is based in Elkins Park in the Philadelphia suburbs, also allegedly took kickbacks on the commissions for those loans from a third party who did “no legitimate work in the loan process,” Berman said in a statement.

“The Small Business Administration exists to provide funding to those pursuing the American dream through owning their own businesses. Edward Shin is now charged with attempting to corrupt that process for his own personal gain,” the Manhattan U.S. attorney said.

According to the complaint against Shin, Noah Bank made loans guaranteed by the Small Business Administration available to eligible businesses in the New York and New Jersey area. These loans required compliance with SBA regulations and procedures in order to be issued.

Specifically relevant to Shin's case, bank officers were prohibited from receiving any payments related to the loans, and loans were barred from being extended to businesses in which a bank officer held an interest.

According to the U.S. attorney's office, Shin directly violated these rules.

Federal prosecutors claim that, between 2009 and 2012, Shin used his position to ensure he got a piece of the action as the loans went out the door and took secret advantage of those same loans at those businesses receiving them.

Shin allegedly ensured that an unnamed loan broker, identified as a cooperating witness, was in place to handle the SBA-backed loans issued by Noah Bank—even when the loan didn't involve and actual broker. The broker was assured a broker's fee, despite doing no work, which he then split with Shin as a form of illegal kickback, according to the complaint.

SBA-guaranteed loans then flowed to businesses that Shin had an ownership stake in. As the complaint notes, the loan scheme was initially raised through a qui tam False Claims Act complaint filed with the U.S. District Court of the District of New Jersey by Marie Lee in 2013. In the New Jersey filings, Lee is identified as the former chief lending officer for Noah Bank.

As Manhattan prosecutors relate, on at least two occasions Shin had loans directed towards New York-based businesses in which Shin, and in one instance his wife, held interests. Nearly $2 million in loans were secured for the businesses, prosecutors said, with SBA chalking up a more-than $611,000 loss on one of the businesses' defaulted loan. In the other, more than $150,000 was drawn from Shin's wife's account. SBA rules would have barred the loan if the family connection had been revealed.

Brickfield & Donahue name attorney Paul Brickfield represents Shin. He did not respond to a request for comment.

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