FOR IMMEDIATE RELEASE CIV

FRIDAY, DECEMBER 29, 2006 (202) 514-2007

WWW.USDOJ.GOV TDD (202) 514-1888

U.S. Files Suit Against John Torkelsen,

Richard Propper,
Daniel Beharry, & Sovereign Bank
Alleging Fraud
of $32 Million Against the Small
Business Administration
WASHINGTON - The Justice Department announced today that it has filed a
lawsuit accusing John Torkelsen, Richard Propper, Daniel Beharry, and Sovereign
Bank of defrauding the Small Business Administration’s Small Business Investment
Company (SBIC) program of $32 million. The suit was filed in the Eastern District
of Pennsylvania under the False Claims Act, which allows the United States to
recover up to three times the amount of its losses plus civil penalties.

The government’s complaint alleges that Torkelsen, Propper and Beharry violated
the conflict of interest and management fee rules of the SBIC program by engaging
in multiple secret transactions that funneled government money into companies
controlled by Propper and Beharry or Torkelsen and his family. The SBIC program
has rules designed to prevent the unauthorized investment of government funds in
companies controlled by those who act as managers of the SBICs. The alleged fraud
is believed to be the largest perpetrated upon the program to date.

The SBIC program, administered by the U.S. Small Business Administration, was
created in 1958 to fill the gap between the availability of venture capital and the
needs of small businesses in start-up and growth situations. The government, itself,
does not make direct investments or target specific industries. Rather, the SBIC
program is a “fund of funds” – meaning that portfolio management and investment
decisions are left to qualified private fund managers. Small businesses which
qualify for assistance from the program are able to receive equity capital, long-term
loans and expert management assistance.

The investigation of the fraud allegations against the defendants was conducted by
the U.S. Attorney's office in Philadelphia, Pa.; the U.S. Small Business
Administration’s Office of Inspector General and Office of General Counsel; the
Federal Bureau of Investigation; and the Justice Department's Civil Division. The
United States has settled with, or reached settlement in principle with, a number of
other individuals or entities involved in the alleged fraud.

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