(SPRINGFIELD, IL) - 3/5/2013 - The former president of a Logan County bank, Bryson John Russell, 65, of Lincoln, Illinois, today on February 27 that he had embezzled funds from the Hartsburg State Bank. During his appearance before U.S. Magistrate Judge Byron Cudmore, Russell waived indictment and entered a plea of guilty to a single count of embezzlement as charged in an information filed on February 20, 2013, by the U.S. Attorney’s Office for the Central District of Illinois.
According to court documents and statements made during the hearing, the government estimates the total loss to the bank to be between $376,000 and approximately $562,292. According to statements presented by the government during today’s hearing, Russell began working at Hartsburg State Bank in Hartsburg, Illinois, in 1966. He became bank president in 1989.
Russell admitted that he began taking cash from the bank to pay for personal items and obligations. At some point, Russell began creating bank loans in the names of various bank customers, including relatives. When the various loans were due, Russell created different, larger loans in relatives’ names and other bank customers’ names to pay off the loans, as well as to embezzle additional money. Further, Russell admitted cashing a customer’s $15,000 certificate of deposit and applying the proceeds to a loan he had created in the customer’s name.
Sentencing for Russell is scheduled for June 27 before U.S. District Judge Richard Mills. For the offense of embezzlement, the statutory penalty is up to 30 years in prison and a fine of up to $1,000,000. The defendant may also be ordered to pay restitution to the victim.
The charges were investigated by the Federal Bureau of Investigation in coordination with the Hartsburg State Bank. Assistant U.S. Attorney Patrick D. Hansen is prosecuting the case.
Showing posts with label banking. Show all posts
Showing posts with label banking. Show all posts
Executives, Borrowers Indicted in Massive Fraud
Bank Collapse Called Largest in Virginia Since 2008NORFOLK, Va. – 7/14/2012 - Top executives and favored borrowers have been indicted by a federal grand jury in Norfolk, Va., accused of masking non-performing assets at the Bank of the Commonwealth for their own personal benefit and to the detriment of the bank. This long-running scheme allegedly contributed to the failure of the bank in 2011, which the Federal Deposit Insurance Corporation (FDIC) estimates will cost the FDIC deposit-insurance fund $268 million.
Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia; John Boles, Special Agent in Charge (SAC) of the FBI’s Norfolk Field Office; Rick A. Raven, Special Agent in Charge (SAC) of the Internal Revenue Service Criminal Investigation (IRS-CI)’s Washington, D.C., Field Office; Christy L. Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP); and Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG), made the announcement.
“The Bank of the Commonwealth’s high risk lending practices resulted in soaring losses after the 2008 financial crisis. Led by former CEO and Board Chairman Edward Woodard, these bank insiders and their favored borrowers allegedly conspired to hide the rapidly deteriorating financial condition of the bank through fraud,” MacBride said. “For more than 30 years, this community put their trust – and their money – in the Bank of the Commonwealth. These charges portray a bank leadership that betrayed that trust for their own profit at the detriment to their own bank, its shareholders and the community it served.”
The 25-count indictment was returned on July 11 and made public July 12 after the following individuals from Norfolk were taken into custody:
- Edward J. Woodard , 69, who served as the bank’s chief executive officer and chairman of the board for more than three decades until he was forced to step down as chairman in April 2010 and forced to retire from the bank in December 2010. Woodard is charged with conspiracy to commit bank fraud, bank fraud, false entry in a bank record, multiple counts of unlawful participation in a loan, multiple counts of false statement to a financial institution and multiple counts of misapplication of bank funds.
- Simon Hounslow , 47, who served as an executive vice president and chief lending officer until the bank closed in September 2011. Hounslow is charged with conspiracy to commit bank fraud, misapplication of bank funds, false statement to a financial institution and multiple counts of false entry in a bank record.
- Stephen G. Fields , 48, who served as an executive vice president and commercial loan officer until he was terminated in December 2010. Fields is charged with conspiracy to commit bank fraud, multiple counts of false entry in a bank record, multiple counts of false statement to a financial institution and multiple counts of misapplication of bank funds.
- Troy Brandon Woodard , 35, the son of Edward Woodard, and who was employed by a wholly-owned subsidiary of the bank as a vice president and mortgage loan specialist until he was terminated in January 2011. Brandon Woodard is charged with conspiracy to commit bank fraud, bank fraud and multiple counts of unlawful participation in a loan.
- Thomas E. Arney , 56, who leased office space on the third floor of the bank’s headquarters and owned and operated a residential development company, several restaurants, rental properties and a car restoration business. Arney is charged with conspiracy to commit bank fraud, bank fraud, unlawful participation in a loan, misapplication of bank funds and multiple counts of false statement to a financial institution.
- Dwight A. Etheridge , 47, who owned and operated a residential and commercial development company, as well as an employment staffing company. Etheridge is charged with conspiracy to commit bank fraud, misapplication of bank funds and multiple counts of false statement to a financial institution.
The indictment alleges that many of the bank’s loans were funded and administered without regard to industry standards or the bank’s own internal controls, and by 2008 the volume of the bank’s troubled loans and foreclosed real estate soared. From 2008 through 2011, bank insiders – Edward Woodard, Hounslow and Fields – allegedly masked the bank’s true financial condition out of fear that the bank’s declining health would negatively impact investor and customer confidence and affect the bank’s ability to accept and renew brokered deposits.
To fraudulently hide the bank’s troubled assets, bank insiders allegedly overdrew demand deposit accounts to make loan payments, used funds from related entities – at times without authorization from the borrower – to make loan payments, used change-in-terms agreements to make loans appear current, and extended new loans or additional principal on existing loans to cover payment shortfalls.
In addition, the indictment alleges that bank insiders also provided preferential financing to troubled borrowers – including Arney, Etheridge and others – to purchase bank-owned properties. These troubled borrowers were already having difficulty making payments on their existing loans; however, the financing allowed the bank to convert a non-earning asset into an earning asset, and the troubled borrowers obtained cash at closing to make payments on their other loans at the bank or for their own personal purposes.
The indictment also alleges that troubled borrowers purchased or attempted to purchase property owned by bank insiders and Brandon Woodard. These real estate loans were fraudulently funded by the bank.
According to the indictment, in November 2008, the Bank of the Commonwealth sent to the Federal Reserve an application requesting approximately $28 million from the Troubled Asset Relief Program (TARP). Based on its regulator's concerns about the health of the bank, the Federal Reserve later requested that the bank withdraw its TARP application, which the bank did.
From 2008 up to its closing in 2011, the bank lost nearly $115 million. The indictment alleges that the bank’s failure will cost the federal government through the deposit insurance fund in excess of $260 million. The forfeiture notice in the indictment attributes at least $71 million as illegal proceeds of the fraud.
Others charged as part of this ongoing investigation include the following:
- Business partners Eric H. Menden, 53, of Chesapeake, Va., and George P. Hranowskyj, 47, of Chesapeake, pleaded guilty to engaging in a $41 million bank fraud scheme that contributed to the failure of the Bank of the Commonwealth. They also pleaded guilty to a separate fraud involving a six-year historic tax credit scheme that cost state and federal governments over $12 million and investors more than $8 million.
- Menden faces a maximum penalty of five years in prison for each count of conspiracy to commit wire fraud, making false statements and conspiracy to commit bank fraud when he is sentenced on Sept. 26, 2012. Hranowskyj faces a maximum of 20 years in prison for conspiracy to commit wire fraud and a maximum of five years in prison for conspiracy to commit bank fraud when he is sentenced on Oct. 15, 2012.
- Natallia Green , 29, of Norfolk, and formerly employed by Menden and Hranowskyj, pleaded guilty to making a false statement on a loan application to the Bank of the Commonwealth. In January 2012, Green was sentenced to five years probation.
- Maria Pukhova , 30, of Virginia Beach, and formerly employed by Menden and Hranowskyj, has been charged with making a false statement on a loan application to the Bank of the Commonwealth.
- Jeremy C. Churchill , 35, of Norfolk, and a former vice president and commercial loan officer at the bank, pleaded guilty to conspiring with others to cause the bank to suffer millions of dollars in losses from loans meant to conceal financial problems at the bank and with one of its customers. Convicted of conspiracy to commit bank fraud, he faces a maximum penalty of five years in prison when he is sentenced on Aug. 24, 2012.
- Recardo S. Lewis , 61, of Norfolk, and a former employee with by Tivest Development & Construction LLC, pleaded guilty to conspiring with others to defraud the Bank of the Commonwealth by submitting fraudulent draws on a multi-million construction project in Virginia Beach. Convicted of conspiracy to commit bank fraud, Lewis faces a maximum penalty of five years in prison when he is sentenced on Sept. 19, 2012.
Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at www.vaed.uscourts.gov or on https://pcl.uscourts.gov.
Source: Financial Fraud Enforcement Task Force
Wachovia Bank Admits to Anticompetitive Conduct
WASHINGTON - 12/10/2011 - Wachovia Bank N.A., which is now known as Wells Fargo Bank N.A., has entered into an agreement with the Department of Justice to resolve the company’s role in anticompetitive activity in the municipal bond investments market and has agreed to pay a total of $148 million in restitution, penalties and disgorgement to federal and state agencies, the Department of Justice announced today.
As part of its agreement with the department, Wachovia admits, acknowledges and accepts responsibility for illegal, anticompetitive conduct by its former employees. According to the non-prosecution agreement, from 1998 through 2004, certain former Wachovia employees at its municipal derivatives desk entered into unlawful agreements to manipulate the bidding process and rig bids on municipal investment and related contracts. These contracts were used to invest the proceeds of, or manage the risks associated with, bond issuances by municipalities and other public entities.
“The illegal conduct at Wachovia Bank corrupted the bidding practices for investment contracts and deprived municipalities of the competitive process to which they were entitled,” said Sharis A. Pozen, acting assistant attorney general in charge of the Department of Justice’s Antitrust Division. “Today’s resolution achieves restitution for the victims harmed by Wachovia’s anticompetitive conduct and ensures that Wachovia disgorges its ill-gotten gains and pays penalties for its illegal conduct. We are committed to ensuring competition in the financial markets and our investigation into anticompetitive conduct in the municipal bond derivatives industry continues.”
Under the terms of the agreement, Wachovia agrees to pay restitution to victims of the anticompetitive conduct and to cooperate fully with the Justice Department’s Antitrust Division in its ongoing investigation into anticompetitive conduct in the municipal bond derivatives industry. To date, the ongoing investigation has resulted in criminal charges against 18 former executives of various financial services companies and one corporation. Nine of the 18 executives charged have pleaded guilty.
The Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS), the Office of the Comptroller of the Currency (OCC) and 26 state attorneys general also entered into agreements with Wachovia requiring the payment of penalties, disgorgement of profits from the illegal conduct and payment of restitution to the victims harmed by the manipulation and bid rigging by Wachovia employees, as well as other remedial measures.
As a result of Wachovia’s admission of conduct; its cooperation with the Department of Justice and other enforcement and regulatory agencies; its monetary and non-monetary commitments to the SEC, IRS, OCC and state attorneys general; and its remedial efforts to address the anticompetitive conduct, the department agreed not to prosecute Wachovia for the manipulation and bid rigging of municipal investment and related contracts, provided that Wachovia satisfies its ongoing obligations under the agreement.
Earlier this year, JPMorgan Chase & Co. and UBS AG also entered into agreements with the Department of Justice and other federal and state agencies to resolve anticompetitive conduct in the municipal bond derivatives market. In July 2011, JPMorgan agreed to pay a total of $228 million in restitution, penalties and disgorgement to federal and state agencies for its role in the conduct. In May 2011, UBS AG agreed to pay a total of $160 million in restitution, penalties and disgorgement to federal and state agencies for its participation in the anticompetitive conduct.
The department’s ongoing investigation into the municipal bonds industry is being conducted by the Antitrust Division, the FBI and the IRS-Criminal Investigation. The department is coordinating its investigation with the SEC, the OCC and the Federal Reserve Bank of New York. The department thanks the SEC, IRS, OCC and state attorneys general for their cooperation and assistance in this matter.
The Antitrust Division, SEC, IRS, FBI, state attorneys general and OCC are members of the Financial Fraud Enforcement Task Force. For more information, visit www.stopfraud.gov.
As part of its agreement with the department, Wachovia admits, acknowledges and accepts responsibility for illegal, anticompetitive conduct by its former employees. According to the non-prosecution agreement, from 1998 through 2004, certain former Wachovia employees at its municipal derivatives desk entered into unlawful agreements to manipulate the bidding process and rig bids on municipal investment and related contracts. These contracts were used to invest the proceeds of, or manage the risks associated with, bond issuances by municipalities and other public entities.
“The illegal conduct at Wachovia Bank corrupted the bidding practices for investment contracts and deprived municipalities of the competitive process to which they were entitled,” said Sharis A. Pozen, acting assistant attorney general in charge of the Department of Justice’s Antitrust Division. “Today’s resolution achieves restitution for the victims harmed by Wachovia’s anticompetitive conduct and ensures that Wachovia disgorges its ill-gotten gains and pays penalties for its illegal conduct. We are committed to ensuring competition in the financial markets and our investigation into anticompetitive conduct in the municipal bond derivatives industry continues.”
Under the terms of the agreement, Wachovia agrees to pay restitution to victims of the anticompetitive conduct and to cooperate fully with the Justice Department’s Antitrust Division in its ongoing investigation into anticompetitive conduct in the municipal bond derivatives industry. To date, the ongoing investigation has resulted in criminal charges against 18 former executives of various financial services companies and one corporation. Nine of the 18 executives charged have pleaded guilty.
The Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS), the Office of the Comptroller of the Currency (OCC) and 26 state attorneys general also entered into agreements with Wachovia requiring the payment of penalties, disgorgement of profits from the illegal conduct and payment of restitution to the victims harmed by the manipulation and bid rigging by Wachovia employees, as well as other remedial measures.
As a result of Wachovia’s admission of conduct; its cooperation with the Department of Justice and other enforcement and regulatory agencies; its monetary and non-monetary commitments to the SEC, IRS, OCC and state attorneys general; and its remedial efforts to address the anticompetitive conduct, the department agreed not to prosecute Wachovia for the manipulation and bid rigging of municipal investment and related contracts, provided that Wachovia satisfies its ongoing obligations under the agreement.
Earlier this year, JPMorgan Chase & Co. and UBS AG also entered into agreements with the Department of Justice and other federal and state agencies to resolve anticompetitive conduct in the municipal bond derivatives market. In July 2011, JPMorgan agreed to pay a total of $228 million in restitution, penalties and disgorgement to federal and state agencies for its role in the conduct. In May 2011, UBS AG agreed to pay a total of $160 million in restitution, penalties and disgorgement to federal and state agencies for its participation in the anticompetitive conduct.
The department’s ongoing investigation into the municipal bonds industry is being conducted by the Antitrust Division, the FBI and the IRS-Criminal Investigation. The department is coordinating its investigation with the SEC, the OCC and the Federal Reserve Bank of New York. The department thanks the SEC, IRS, OCC and state attorneys general for their cooperation and assistance in this matter.
The Antitrust Division, SEC, IRS, FBI, state attorneys general and OCC are members of the Financial Fraud Enforcement Task Force. For more information, visit www.stopfraud.gov.
Executive Faces 30 Years in $1.9 Billion Scheme
WASHINGTON – 2/24/2011 – Desiree Brown, the former treasurer of a private mortgage lending company, Taylor, Bean & Whitaker (TBW), pleaded guilty today to conspiring to commit bank, wire and securities fraud for her role in a more than $1.9 billion fraud scheme that contributed to the failures of Colonial Bank and TBW.
Brown, 45, of Hernando, Fla., pleaded guilty before U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia.
Brown faces a maximum penalty of 30 years in prison when she is sentenced on June 10. In a related action, the U.S. Securities and Exchange Commission (SEC) today filed an enforcement action against Brown in the Eastern District of Virginia.
According to court documents, Brown admitted that from late 2003 through August 2009, she and her co-conspirators, including former TBW chairman Lee Farkas engaged in a scheme to defraud various entities and individuals, including Colonial Bank, a federally-insured bank; Colonial BancGroup Inc.; shareholders of Colonial BancGroup; investors in Ocala Funding LLC, including Deutsche Bank and BNP Paribas; the Troubled Asset Relief Program (TARP); and the investing public. One of the goals of the scheme to defraud was to obtain funding for TBW to assist it in covering expenses related to operations and servicing payments owed to third-party purchasers of loans and/or mortgage-backed securities.
According to court documents, Brown admitted that from late 2003 through August 2009, she and her co-conspirators, including former TBW chairman Lee Farkas engaged in a scheme to defraud various entities and individuals, including Colonial Bank, a federally-insured bank; Colonial BancGroup Inc.; shareholders of Colonial BancGroup; investors in Ocala Funding LLC, including Deutsche Bank and BNP Paribas; the Troubled Asset Relief Program (TARP); and the investing public. One of the goals of the scheme to defraud was to obtain funding for TBW to assist it in covering expenses related to operations and servicing payments owed to third-party purchasers of loans and/or mortgage-backed securities.
According to court documents, Brown and her co-conspirators referred to one aspect of the fraud scheme as “Plan B.”
“Plan B” generated money for TBW through the fictitious “sales” of mortgage loans to Colonial Bank. The conspirators accomplished this by sending mortgage data to Colonial Bank for loans that did not exist or that TBW had already committed or sold to other third-party investors. As a result, the Plan B loan data was recorded in Colonial Bank’s books and records, and gave the false appearance that Colonial Bank had purchased legitimate interests in mortgage loans from TBW. Brown admitted that she and her co-conspirators caused Colonial Bank to pay TBW for assets that were worthless to Colonial Bank.
Brown admitted that, as part of the fraud scheme, she and her co-conspirators also caused TBW to sell fictitious trades, which had no pools of loans collateralizing them, to Colonial Bank. Brown and her co-conspirators caused false information about the trades to be entered on Colonial Bank’s books and records, giving the appearance that the bank owned interests in legitimate trades, when in fact the trades had no value and could not be sold.
Court documents indicate that the conspirators caused Colonial Bank to pay TBW more than $400 million for assets that in fact had no value, and caused Colonial Bank and Colonial BancGroup to hold these assets on their books as if they had actual value. Additionally, the conspirators caused TBW to misappropriate more than $1 billion in collateral from Ocala Funding LLC, a mortgage lending facility owned by TBW.
According to court documents, the fraud scheme also included an effort by the conspirators in the fall of 2008 to obtain $570 million in taxpayer funding through the Capital Purchase Program (CPP), a sub-program of the U.S. Treasury Department’s TARP program. In connection with the application, Colonial BancGroup submitted financial data and filings that included materially false information related to mortgage loan and securities assets held by Colonial Bank as a result of the fraudulent scheme admitted to by Brown. Colonial BancGroup never received the TARP funding.
In August 2009, the Alabama State Banking Department, Colonial Bank’s regulator, seized the bank and appointed the FDIC as receiver. Colonial BancGroup also filed for bankruptcy in August 2009.
In June 2010, Farkas was arrested and charged in a 16-count indictment for his role in the fraud scheme. His trial is scheduled to begin in April 2011. An indictment is merely a charge and a defendant is presumed innocent until proven guilty.
The guilty plea was announced today by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Special Inspector General Neil Barofsky for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; Michael P. Stephens, Inspector General of the Department of Housing and Urban Development (HUD OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA OIG); and Victor F. O. Song, Chief of the Internal Revenue Service (IRS) Criminal Investigation.
The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia. This case was investigated by SIGTARP, FBI’s Washington Field Office, FDIC OIG, HUD OIG, FHFA OIG and the IRS Criminal Investigation. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation.
Survey: Small Businesses Weigh In On Economy
MCLEAN, Va. - (BUSINESS WIRE) - 11/21/10 - Capital One Small Business Banking recently released the results of its third quarter Small Business Barometer survey.
The quarterly survey polls small businesses across the nation, gauging their current financial condition and business projections for the next six months.
Third quarter survey results suggest that many U.S. small businesses are slightly less optimistic about the strength of the economy and their own financial position relative to last quarter. While many small businesses polled report that they are experiencing stable economic conditions and steady financial performance for their businesses, a decreased percentage believe economic conditions are improving and fewer say that their financial position has improved since last year.
Accordingly, an increased percentage of small businesses surveyed plan to hold spending on business development and investments at current levels rather than increasing spending. On the hiring front, however, an increased number of small businesses report plans to add positions over the next six months.
“Our survey results for the third quarter of this year suggest that financial performance is stable for many of the small businesses we surveyed, but some respondents have a more cautious outlook about their growth and expectations for the broader economy and their business,” said Robert M. Kottler, Executive Vice President of Small Business Banking at Capital One. “It is a positive sign, however, that most small businesses believe they have access to the credit and financing they need and many are making plans to increase their workforce and begin hiring again.”
Outlook and Financial Performance
The survey results suggest that the overall economic outlook of U.S. small businesses has continued to weaken slightly. While financial performance remains stable for most small businesses, fewer respondents report improved finances compared to last quarter.
Most U.S. small businesses polled plan to continue holding off on additional business development and investment spending in the near-term, but the percentage of respondents reporting plans to hire increased slightly.
The survey results suggest that most small businesses continue to have adequate access to credit and financing.
Last quarter, the Small Business Barometer survey found that there were significant uncertainties about the potential longer-term consequences of the Gulf oil spill. Results from the third quarter suggest that the impact of the spill has not spread significantly and fewer respondents believe they will be affected long-term.
The findings reported in this release are from a telephone survey conducted by the opinion research firm, Braun Research of Princeton NJ. Braun Research interviewed a nationally-representative sample of 1,901 for-profit small businesses in the U.S., weighted to Dunn and Bradstreet counts of all businesses nationwide by employee size and geography. Samples were also taken in New York, New Jersey, Louisiana, Texas and the Washington, D.C. metropolitan area. Small businesses are defined as those with less than $10 million in annual revenue. The interviews were conducted from September 14 - October 5, 2010. All interviews were conducted by telephone at their places of business. One respondent per business was contacted. The margin of error is ± 2.3 percentage points at the 95% confidence level. Interviews were monitored at random. Sampling for this study was conducted using a national sample of businesses drawn from InfoUSA. All interviews were conducted using a computer assisted telephone interviewing system. Statistical weights were designed from the United States Department of Commerce to ensure proper inclusion of all SIC codes.
The quarterly survey polls small businesses across the nation, gauging their current financial condition and business projections for the next six months.
Third quarter survey results suggest that many U.S. small businesses are slightly less optimistic about the strength of the economy and their own financial position relative to last quarter. While many small businesses polled report that they are experiencing stable economic conditions and steady financial performance for their businesses, a decreased percentage believe economic conditions are improving and fewer say that their financial position has improved since last year.
Accordingly, an increased percentage of small businesses surveyed plan to hold spending on business development and investments at current levels rather than increasing spending. On the hiring front, however, an increased number of small businesses report plans to add positions over the next six months.
“Our survey results for the third quarter of this year suggest that financial performance is stable for many of the small businesses we surveyed, but some respondents have a more cautious outlook about their growth and expectations for the broader economy and their business,” said Robert M. Kottler, Executive Vice President of Small Business Banking at Capital One. “It is a positive sign, however, that most small businesses believe they have access to the credit and financing they need and many are making plans to increase their workforce and begin hiring again.”
Outlook and Financial Performance
The survey results suggest that the overall economic outlook of U.S. small businesses has continued to weaken slightly. While financial performance remains stable for most small businesses, fewer respondents report improved finances compared to last quarter.
- In the first quarter, 39 percent of small business owners surveyed said that economic conditions for their business were improving, but this number dropped to 32 percent in the second quarter of this year and 27 percent in the third quarter. Nearly half (49 percent) of small businesses report stable conditions and one-quarter (24 percent) say that economic conditions are getting worse.
- Thirty percent of small business owners polled report that their firm’s financial position is better than it was one year ago, down seven percentage points since last quarter. On a year-over-year basis, however, this number is up six percentage points. About half (51 percent) of small businesses surveyed say that their firm’s financial position has held steady relative to one year ago. This number increased 8 percentage points since last quarter. Consistent with the last two quarters, only 18 percent of small businesses report that their financial position has worsened compared to one year ago.
Most U.S. small businesses polled plan to continue holding off on additional business development and investment spending in the near-term, but the percentage of respondents reporting plans to hire increased slightly.
- The majority (66 percent) of small businesses say they plan to keep business development and investment spending at current levels for the next six months. Fewer small businesses plan to boost spending this quarter – only 16 percent – compared to 21 percent in the second quarter. Consistent with results from the last three quarters, 15 percent of respondents reported plans to decrease spending.
- Thirty percent of small businesses polled in the third quarter plan to add employees to the payroll over the next six months, consistent with results from the first quarter of 2010 but 4 percentage points higher than last quarter. Still, 63 percent of small businesses say that they will not hire additional employees during the same period.
The survey results suggest that most small businesses continue to have adequate access to credit and financing.
- Nearly three-quarters (73 percent) of small businesses surveyed report that they are able to access the financing they need while 22 percent say they do not have adequate access to credit and financing.
- About one-quarter (23 percent) of small businesses in the survey say that securing the capital needed to continue operations will be one of the biggest challenges they face over the next six months.
- When asked about funding sources for financing their firm’s growth, half (52 percent) of respondents say they will seek financing from a bank or commercial lender, consistent with past results. A slightly increased number of respondents say they will rely on personal savings to finance growth (40 percent compared to 35 percent last quarter).
Last quarter, the Small Business Barometer survey found that there were significant uncertainties about the potential longer-term consequences of the Gulf oil spill. Results from the third quarter suggest that the impact of the spill has not spread significantly and fewer respondents believe they will be affected long-term.
- To date, only 11 percent of small businesses surveyed say that their business has decreased since the spill, the same as last quarter. Six percent report increased business.
- Only 13 percent of small business owners or managers nationally believe the disaster will have a moderate to significant impact on their business, down from 25 percent in the second quarter. Ten percent say that it’s too early for them to predict whether or not their business will be affected, whereas 17 percent of respondents were unsure about the longer-term impact last quarter.
The findings reported in this release are from a telephone survey conducted by the opinion research firm, Braun Research of Princeton NJ. Braun Research interviewed a nationally-representative sample of 1,901 for-profit small businesses in the U.S., weighted to Dunn and Bradstreet counts of all businesses nationwide by employee size and geography. Samples were also taken in New York, New Jersey, Louisiana, Texas and the Washington, D.C. metropolitan area. Small businesses are defined as those with less than $10 million in annual revenue. The interviews were conducted from September 14 - October 5, 2010. All interviews were conducted by telephone at their places of business. One respondent per business was contacted. The margin of error is ± 2.3 percentage points at the 95% confidence level. Interviews were monitored at random. Sampling for this study was conducted using a national sample of businesses drawn from InfoUSA. All interviews were conducted using a computer assisted telephone interviewing system. Statistical weights were designed from the United States Department of Commerce to ensure proper inclusion of all SIC codes.
