Tuesday, March 10, 2009

Agape got two government loans, not one!

BY MICHAEL AMON michael.amon@newsday.com
March 1, 2009
Agape World, the Hauppauge investment firm that authorities say was operated as a $370-million Ponzi scheme, got a helping hand from the federal government with two Small Business Administration-backed loans totaling more than $100,000, the agency's records show.The loans for $53,300 in 2002 and $50,000 in 2005 - made by private banks and insured by the federal government - were approved even though Agape World president Nicholas Cosmo had been convicted in 1999 on a federal charge of fraud and swindle.Cosmo was required by law to disclose his criminal history on applications for government backing. Mike Stamler, a spokesman for the Small Business Administration, said Friday night that he did not have access to the loan applications that would show what Cosmo indicated.Sen. Charles Schumer (D-N.Y.) said approval of the loans raises "troubling" questions about the Small Business Administration's vetting process. In a letter on Friday, Schumer called on Small Business Administration Inspector General Peter McClintock to conduct an investigation.
"It was almost as if the SBA was an unwitting accomplice in a crime that bilked Long Islanders out of millions," Schumer said in a statement, adding: "The SBA needs to do a top-down review of its vetting process because, with credit in such short supply, we cannot let another loan go astray."Cosmo, 37, of Lake Grove, has been charged with one count of federal mail fraud and is being held until a bail package can be negotiated. Agape World investors believed they were funding high-interest commercial loans, but federal prosecutors say few loans were made and Cosmo instead used investor money to pay off subsequent investors in a classic Ponzi scheme.McClintock did not return a call Friday. Stamler declined to say if a probe was under way.Cosmo's attorney, Stacey Richman, said she could not comment because she was not aware of the loans.Stamler said criminal background checks generally are only conducted when an applicant states on a loan application that he has been convicted of a crime. That information then is checked by the agency and the FBI, Stamler said. For applicants who state they have not been convicted of a crime, no further action is usually taken, he said."It has occurred, but it's not automatic," Stamler said. "That's how we go about it."If Cosmo did reveal his criminal background on SBA Form 912 "Statement of Personal History," the application says it would not necessarily have disqualified him.Cosmo's conviction came on Jan. 1, 1999, when he pleaded guilty to one count of fraud and swindle for misleading investors while a licensed stock broker at Continental Broker-Dealer, a now-defunct Carle Place company. According to a National Association of Securities Dealers complaint, Cosmo replaced a client's account with an account over which Cosmo had control and transferred the client's funds into that account, without the client's consent or knowledge.Cosmo was sentenced to 21 months at Allenwood Federal Correctional Complex in Montgomery, Pa., and had his NASD license revoked. He also agreed to "intensive outpatient gambling therapy" and to pay restitution of $177,000. Separately, the NASD fined Cosmo $68,000.Stamler said the Agape loans were part of the SBA's guaranteed loan program, which insures loans made by private banks to applicants seen as credit risks. Stamler said he did not know which banks gave the loans or how much was dispersed to Agape World.THE AGAPE WORLD CASEThe alleged scam: Federal authorities say Nicholas Cosmo, president of Hauppauge-based Agape World Inc., told investors their money was invested in high-interest commercial loans, when in fact the money was mostly funneled to new investors, bet on improper commodities trading and even funded NT Baseball, a youth league in Seaford. Cosmo, 37, of Lake Grove, who has pleaded not guilty to mail fraud, is being held as a bail package is being negotiated.Government help: Federal records show that Agape World was approved for Small Business Administration-backed loans of more than $100,000, even though Cosmo had been convicted of fraud in 1999. Sen. Charles Schumer (D-N.Y.) has called for an investigation.The profits: Authorities say Cosmo paid employees who brought new investors into the company more than $55 million in commissions in the last five years. An investor lawsuit alleges the money was used on luxurious homes, jewelry, flashy cars and expensive vacations.Bankruptcy Court: Angry investors sent Agape World into Chapter 7 bankruptcy, and a court-appointed trustee charged with recovering lost funds now is conducting his own probe. His targets include a youth sports arena in Hauppauge owned by Cosmo, an Italian restaurant in Woodbury co-owned by Cosmo and businesses owned by Agape World employees

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