East Greenwich bank executives accused of profiting from illicit loan scheme.

The CEO of a little-known East Greenwich bank is accused of taking part in a fraudulent scheme that cost the U.S. Small Business Administration an estimated $8.8 million.

Between 2017 and 2019, most of Independence Bank’s profits came from making government-backed loans to businesses. Many had been referred by an individual named John C. Ponte, according to federal regulators.

Ponte’s company, Ponte Investments LLC, allegedly offered high-interest “bridge loans” to customers who had applied for SBA loans. Those customers were then directed to pay back the bridge loans with the SBA loan money once they were approved, and many later defaulted on their SBA loans.

Robert S. Catanzaro, CEO of Independence Bank, is accused of working with Ponte to conceal the scheme. Additionally, Danielle M. Desrosiers, who at the time was the chief operating officer for Independence Bank, allegedly entered a romantic relationship with Ponte and began working for him while still employed by the bank.

The Federal Deposit Insurance Corporation is now seeking hundreds of thousands of dollars in financial penalties as well as a ban that would block Catanzaro, Desrosiers, and Ponte from working at any federally insured banks.

All three have denied any wrongdoing.

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How the alleged scheme worked

Ponte Investments also operated under the names "SBA Loan Program" and "SBALoanProgram.com” and targeted struggling small businesses “by purporting to offer financial relief,” according to the FDIC.

The company allegedly encouraged businesses to apply for SBA loans from Independence Bank and would offer a bridge loan while the business owner waited for their application to be approved.

The bridge loans had high annual interest rates – often 50% to 100%, according to the FDIC. Once borrowers were approved for SBA loans, they ended up spending a large chunk of that money on paying off the bridge loan.

Ponte routinely charged impermissible “business analysis” fees to borrowers, and collected at least $326,000 from those fees, according to the FDIC. He also allegedly altered borrowers' information in order to ensure that their SBA loans would be approved.

Independence Bank benefitted from the arrangement because the loans were 85% guaranteed by the SBA. The bank was able to sell the guaranteed portion of the loans on the secondary market “at a significant profit,” which it might not have been able to do without the SBA’s backing, according to the FDIC.

Independence Bank also "regularly charged impermissible fees to SBA Loan applicants," the FDIC alleges.

SBA lost millions as borrowers defaulted

Administering the small-business loans was Independence Bank’s “sole business strategy” between 2017 and 2019, according to the FDIC. Ponte was allegedly responsible for about 76% of the total dollar amount of loans approved by the bank.

The loser in this scheme was the SBA. According to the FDIC, 44% of the businesses that were referred by Ponte and took out bridge loans ended up defaulting on their SBA loans.

The SBA determined that Independence Bank’s default rate was five times higher than other comparable banks, and barred the bank from its loan program in 2019. According to the FDIC, the “mounting losses” ultimately added up to at least $8.8 million.

The bridge loans themselves violated the SBA's policies, as did the practice of repaying them with SBA loan proceeds. The FDIC alleges that Catanzaro worked with Ponte to ensure the bridge loans would not be documented in the bank's records and to hide them from the SBA.

A spokesperson for Ponte provided documents to The Journal that that they say shows that so-called bridge loans were allowed under the SBA’s standard operating procedures guidelines during these years.

The FDIC alleges that Desrosiers also “knew that SBA loan applications to the bank failed to document bridge loans but permitted applications with inaccurate information to be submitted anyway."

Executive accused of double-dipping

Desrosiers was deemed the “liaison" between Ponte Investments and Independence Bank, and was sent to work out of Ponte's office "to improve coordination,” according to the FDIC.

Sometime after that, she developed a romantic relationship with Ponte, the notice says. While still working for Independence Bank, she began receiving weekly payments from Ponte Investments and Ponte's other company, Hydrangea Capital.

In total, those weekly payments added up $120,000, according to the FDIC. Ponte Investments also allegedly began making payments on a Mercedes-Benz in Desrosiers’ name.

Desrosiers did not disclose the payments or her relationship with Ponte to Independence Bank’s board, according to the notice. When the board found out anyway, she was removed as COO but given the title of executive vice president of ISO lending operations.

Meanwhile, Desrosiers "began to take on roles and responsibilities of a Ponte Investments senior employee,” according to the FDIC. She eventually assumed the title of director of operations for Ponte Investments even though she remained an executive for Independence Bank until 2018.

Key players deny wrongdoing; bank accused of scapegoating

Catanzaro, who remains the CEO of Independence Bank, faces $400,000 in fines from the FDIC.

Independence Bank spokeswoman Heather Marshall noted that the bank itself is not a party to the FDIC's notice of charges. Catanzaro denies that he engaged in any prohibited conduct, and will "vigorously defend himself" against the allegations, she said.

The bank previously agreed to a 2019 consent order with the Department of Business Regulation, which, among other things, stated that the board needed to play a more active role in overseeing the bank's affairs and that the bank needed to reform its underwriting practices.

Desrosiers is facing $128,000 in fines. In a statement, she described the FDIC’s allegations as “baseless” and “a coordinated effort” by senior managers at Independence Bank to “deflect responsibility.”

“To be clear, I did not engage in any improper conduct with the SBA loan program,” Desrosiers said. “I followed the bank’s direction and guidance with regards to the program as senior management had over 20 years of experience with the SBA. I was a project manager for the program and had no past lending experience. I was not an underwriter, approver, closer or servicer. “

Desrosiers said the bank had been fully aware of her relationship with Ponte, and that the funds that she received from him were “related to living expenses … and continued after I left the bank and was still living with Mr. Ponte.”

Ponte separately faced charges from the Federal Trade Commission for misleading consumers in 2020, and agreed to a settlement. His business is now operating under the name Greenwich Business Capital LLC. He faces $74,000 in fines from the FDIC.

In a statement, Ponte said that he strongly disputes “the inaccurate and unfounded allegations” by the FDIC, and that basic facts in the notice were incorrect.

“The information the FDIC is relying on came from the bank, and the bank has been cited repeatedly for their servicing and collection practices,” he said.

Ponte said that the bank was seeking to make him a scapegoat for “its lack of sound lending practices, as well as to cover up its lack of adherence to well-established standards of practice in its SBA loan program, and failure to report accurate information to the FDIC. “

“This entire situation boils down to a clear lack of control in Independence Bank's compliance department, which wholly failed in its charge,” he said.

This article originally appeared on The Providence Journal: CEO of Independence Bank in East Greenwich accused of illicit loan scheme