SBA Loan Firm Is Subject of Investigation : Investigations: State’s Justice Department alleges David Turkin’s Inter-Cal Financial misrepresented what his company could do for clients in at least 44 cases.

WOODLAND HILLS —  After a five-month investigation, the state’s Justice Department has alleged that David Turkin, a consultant specializing in “packaging” federal Small Business Administration loans, defrauded entrepreneurs of at least $178,000 by assuring clients he would help them get loans.

Investigators say Turkin, who runs Inter-Cal Financial of Woodland Hills, charged on average $2,000 to $5,000 in advance fees for putting together SBA loan applications. Turkin advertised regularly in major newspapers, and he did help prepare the applications, state officials say. But in at least 44 cases over several years, investigators allege, Turkin misrepresented what he could do for clients--many of them struggling business operators with poor credit histories.

“We feel he’s committed grand theft by false pretenses, by misstating what he can do,” said David Young, a special agent for the state Justice Department in Los Angeles. In September, Young led a team of investigators who, with a search warrant, seized half a dozen boxes of files at Turkin’s offices.

Young said the allegations against Turkin are contained in a 30-page report he will present this week to the county’s district attorney’s office for possible criminal prosecution.

Turkin, 48, says he never made guarantees to clients. He contends that some former customers misinformed him or failed to provide documents, resulting in loan rejections or processing delays.

“All we do is put the paperwork together,” Turkin said in an interview. Inter-Cal, which has four employees, operates out of a house Turkin owns on Fallbrook Avenue.

Carlos Cantero, 44, owner of a tire-repair business in Sylmar, said he called Inter-Cal in June, 1992, after reading one of Turkin’s newspaper ads. Cantero had a history of loan rejections from banks. But when he met Turkin, Cantero was filled with hope. Cantero was one of the business people interviewed as part of the state’s investigation.

“He said my chances were pretty good,” Cantero recalled. “He told me it would take two months to get my (SBA) loan.” Turkin also wanted a fee of $2,300--upfront. That evening Cantero wrote him a check for $700, and he sent the rest a couple of weeks later, he said, borrowing the money from a friend.

But Cantero says he didn’t hear from Turkin for months. Finally last May, Cantero received a rejection letter from Queen City Bank in Fountain Valley, which said Cantero had inadequate cash flow to qualify for a $50,000 loan.

Cantero has since tried to get back the $2,300 fee he paid Turkin, but he said Turkin has been unresponsive. “I think I got taken,” Cantero said recently.

Turkin denies he made any assurances to Cantero. Turkin claims he first submitted Cantero’s application to Queen City in July, 1992, but he says late paperwork from Cantero and initial denials from Queen City caused delays.

But Jerry Casteel, manager of SBA loans at Queen City, said: “We got the file from Turkin’s office in the beginning of May, 1993. We declined the loan on the sixth of May and that’s it. We never looked at it again.”

Casteel added: “It should have never gotten this far. These poor people should have been told on first contact that their application would not have qualified.”

Justice Department records show that Turkin has a past felony conviction for grand theft in connection with fraudulent sales of travel packages. Turkin acknowledged that conviction.

Turkin has been operating Inter-Cal since 1986. He said he began packaging loans “strictly by accident.”

He is one of a growing number of loan packagers in Southern California whose business has benefited with the booming volume of SBA-guaranteed loans nationwide, which now exceeds $6 billion annually.

Most experts agree that loan packagers can help, although individuals can also put together their own applications with the help of an accountant. The SBA, a federal agency, guarantees up to 90% of small-business loans that are funded by banks and other commercial lenders. The agency can generally guarantee up to $750,000 of a loan.

The SBA says it takes about 21 hours to put together all the financial statements, tax returns and other reports that go into an application. Analysts say banks and independent consultants who package SBA loans charge an average $500 to $1,500.

Frank Ures, chief executive officer at American Pacific State Bank in Sherman Oaks, the nation’s sixth-largest generator of SBA loans, says flatly: “You don’t need a (outside) packager because banks will assist you in putting together your package.”

American Pacific has two employees who specialize in packaging SBA loans, and their maximum fee is $1,000. Other banks often refer candidates for SBA loans--after an initial screening--to outside consultants who package loans.

Loan packaging is a murky and unregulated business. The SBA does not monitor loan packagers, and the state’s Department of Corporations, although requiring licenses for loan brokers, makes no such demand on loan packagers. There is a state law on “credit services organizations” that requires people who help others obtain loans to post a bond, but that law is rarely enforced, analysts say.

Loan packagers, however, are now coming under scrutiny. Government officials say packagers have contributed to a proliferation of fraud in SBA loan applications, and agency investigators are now preparing cases against several packagers in Southern California who allegedly helped applicants provide false tax returns. Turkin is not a target of those SBA investigations, a government source said.

However, Deborah Jones, a special agent at the SBA’s inspector general’s office in Los Angeles, says that in the last two years she has received a dozen complaints from former Inter-Cal clients. That far exceeds the number filed against any other packager, said Jones, who estimates there are two dozen SBA loan packagers in Southern California.

In June, Jones referred the grievances against Turkin to the state’s Justice Department, which later found dozens of other complaints against Turkin on file with the Better Business Bureau, the Los Angeles Police Department and in small claims court.

Based on interviews with former employees at Inter-Cal, Young at the Justice Department alleges that Turkin’s overall success rate in getting SBA loans for his clients was probably no more than 15%. Turkin says it was higher, but he declined to give a figure. Turkin said he turned down as many as 70% of the customers who contacted him. But he conceded he had no expertise in analyzing financial data. Turkin did provide a list of seven clients who he said were satisfied customers.

One of them, Riverside restaurateur Kent Andersen, said Turkin helped him get a $310,000 loan in three months. “Everything went fine,” he said.

Steve Stultz, owner of Stultz Financial, an SBA loan packager in Newport Beach, says he gets most of his loan work on referrals from banks. Stultz, who has been packaging loans for 20 years, said several people who paid Turkin but were unable to get loans had later contacted him. “Turkin doesn’t have a feel for what the SBA is looking for,” Stultz said.

Stultz said Turkin’s fees are higher than the industry norm, but Stultz said that is probably because Turkin has spent a lot to advertise. Turkin used to advertise twice a week in The Times.

One of Turkin’s clients was Alan Bergman. Bergman said Turkin came to his home in Independence, Calif., in 1991. Bergman said Turkin made his presentation in the Bergmans’ back yard, showing a scrapbook of congratulatory letters from former clients. “He was very convincing,” Bergman said.

But after turning over about $2,000 that summer day, Bergman alleges that Turkin did nothing for him. “In the end, my wife did all the paperwork, without Turkin’s help, and we got our loan,” he said.

Turkin said he submitted Bergman’s loan application to Mechanics National Bank in Paramount in October, 1991, and that the bank denied the loan. Turkin said he then submitted it to another bank, but he could not remember which one. He said Bergman withdrew that application.