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Darr, the BLX appraisal compared “a functional, operational property” to his property, which was “closed down, abandoned, broken down, partially boarded up, roofs partially leaking and missing many hotel fixtures that were stolen.”

According to Darr (and documentation he provided), BLX reneged on the written-promise for the additional $300,000, so he could not complete the needed renovations. As he put it in the video, “This predator-lender, I have appealed to them so many times and just nothing happens to them. They think they have got everything. They have all the influence in the world and nobody can touch them and nobody can do anything.” As a result, the property never got to a good enough condition to operate profitably or become a Knight’s Inn. Darr had spent the last two years working around the clock at the front desk, but was now about to lose the motel. He wrote, “Improvements were all done by my money, as BLX never spent a dime and got the increase in property value by getting me, the borrower, to spend my money on their property. . . . BLX’s plan was to engineer my default to repossess this property and resell to some other minority victim.” He put his story onto YouTube in a desperate appeal for help and to warn others about borrowing from BLX.

Brickman called the SBA about Darr’s plight. Armed with Darr’s paperwork, his own research, and additional information he obtained from the SBA by a FOIA request, Brickman spoke with SBA lawyer Christa Brusen-Gomez about the Darr loan. He described to her how BLX sold the property to Darr for more than the appraised value and that Darr was being used to bail out old SBA loans. Under SBA rules, a new SBA loan cannot be made to replace an existing SBA loan. She told him, “If a buyer wanted to pay 120 percent of what a property in liquidation is worth, that is his problem.” When Brickman told her that BLX never gave him the appraisal showing the low value, she said, “Then, he should have gotten his own appraisal.” In short, it appears that the SBA does not care if borrowers can pay, if BLX issues SBA second liens that leave the SBA undersecured, or if BLX withholds appraisals that show the property is not worth the sale amount. The SBA helps its lenders, not its borrowers.

After the Senate hearing, we received unexpected bad news on our whistle-blower lawsuit regarding the shrimp boat loans. The False Claims Act is designed to encourage informed citizens called “relators” to bring suit on behalf of the government. Many relators have firsthand knowledge of the fraud. However, on the other extreme are the opportunists who read about a fraud in the newspaper, have no independent knowledge of their own, but rush to court to file a lawsuit and claim a share of the recovery. Congress sought to eliminate this sort of behavior by denying jurisdiction over actions brought by such relators, “based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Account Office report, hearing, audit or investigation, or from the news media, unless . . . the person bringing the action is an original source of the information.”

BLX argued that Brickman and Greenlight were not an original source of the information, that there were news stories about problems in the shrimping industry, and that other pieces of our information had been obtained from public sources. BLX argued that for these reasons the court lacked jurisdiction to hear the case.

In response, we pointed out that Congress deliberately amended the False Claims Act to encourage the precise type of lawsuit that we brought, where the case is based not on public “information” but, instead, is based on specific “allegations or transactions” of fraud that had not previously been publicly disclosed. No one had publicly alleged fraud prior to our suit. The general news stories about the shrimp boat industry did not discuss allegations of fraud or any transactions. Neither did any of the pieces of information in our complaint. We, and no one else, had meticulously figured out the fraud from a variety of sources, including non-public interviews with former employees and the BLX delinquency report, which led us to the fraud in the first place.

Atlanta U.S. District Court Judge Julie Carnes surprised us by siding with BLX. She took a very broad view of what information is public (including information we used from depositions that were not part of a filed court record, U.S. Coast Guard vessel abstracts, and responses to FOIA requests) and determined that “most of the factual information in their complaint was available to any member of the public who cared to search for it.” As for our review of internal BLX records and interviews with former employees, Judge Carnes concluded that we had not identified clearly what facts we used from the nonpublic material in making our complaint.

Even though the “allegations or transactions” had not been publicly disclosed, Carnes reasoned that since both the misrepresented facts (that BLX had complied with various SBA requirements and regulations) and the true facts (that they had not done so) were public, it amounted to the same thing as a public disclosure of the allegations. As a result, she dismissed our case prior to discovery, on the technicality that the court lacked jurisdiction to evaluate the merits of our complaint.

On the second page of her ruling, Judge Carnes footnoted, “However, there is an additional financial motive behind this case. James Brickman and Greenlight Capital have been publicly identified as having a ‘short’ position in the stock of Allied Capital, Inc., a publicly traded company that owns approximately 95% of defendant BLX. A short seller borrows stock from a lender and sells the borrowed stock, hoping and expecting that the price of the stock will decline. If the price declines, the short seller will be able to purchase the stock

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