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The Bank Never Lost the Money

ATLANTA — When Andre Lee Gaines was sentenced in October 2021, the judgment ordered him to repay $806,710 in Paycheck Protection Program money. It named two victims: $782,508.70 to Cross River Bank and $24,201.30 to the U.S. Small Business Administration.1 Four years later, the bank's name came off the order. On July 15, 2025, a judge in the Northern District of Georgia amended the judgment to make the SBA the only payee.2 The government's motion, filed the day before, explained why: the SBA had already paid Cross River Bank in full, $862,914.47, and had become subrogated to the bank's rights.3

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The SBA paid the bank, so the SBA took the bank's place: that is the lender side of PPP in one motion. The criminal dockets record it without ever quite saying it out loud.

What a guaranty purchase is

PPP loans were made by banks and fintech-partnered lenders, but they carried a 100 percent federal guaranty. The lender fronted the cash and collected a government-paid processing fee for originating the loan. If the loan was later forgiven, the SBA paid the lender. If the loan was not forgiven and the borrower stopped paying, the lender asked the SBA to buy back the guaranteed portion. The SBA then paid the lender and charged the loan off its own books.4 In the Gaines purchase described below, that payment covered the outstanding principal, the accrued interest and the processing fee.3 At that point the lender has been made whole. Its origination fee is income it keeps. Its principal is money the government returned. Whatever the borrower did, the lender's ledger nets to zero or better.

The SBA's own inspector general put numbers to the scale of it. Between July 2021 and December 2022, the agency charged off 203,101 PPP loans worth $7.3 billion, purchasing the guaranty and writing off the debt in the same motion.4 The report also found the SBA did not consistently make lenders perform the servicing and collection work they were supposed to do before the government absorbed the loss.4

Where subrogation sends the money

Once the SBA has paid the bank, it inherits the bank's right to be repaid. Lawyers call that subrogation. It is the same principle as an insurer who covers your stolen car and then goes after the thief in your place. The debt does not shrink; the party owed it changes.

The Mandatory Victims Restitution Act carries this into criminal cases. Restitution is owed to the victim, but 18 U.S.C. § 3664(j)(1) directs that when someone else has already compensated the victim for its loss, the restitution is redirected to whoever paid. In Gaines's case, Cross River Bank was the victim on paper in 2021. By 2025 the SBA had reimbursed the bank, so the SBA became the victim of record, and the payments Gaines still owed were rerouted to it.32 The government told the court it was not changing the amount he owed or his liability, only the destination of the checks.3

The $24,201.30 that the 2021 judgment already assigned to the SBA is the exact figure the SBA later listed as the processing fee it paid Cross River Bank when it bought the guaranty.13 The government reimbursed the originating lender for the fee it earned on the loan, and folded that reimbursement into the restitution debt owed by the borrower.

The person in the middle

Gaines pleaded guilty to one count of making a false statement under 18 U.S.C. § 1001.5 That is the adjudicated fact. His company, Gaines Reservation and Travel, received a $806,710 PPP loan (SBA Loan No. 8300887401) through Cross River Bank,3 and the plea scoped his restitution to the full loan even though the parties stipulated that the loss attributable to his own false-statement count was $6,500 or less.5

The fuller account of his role comes from his sentencing memorandum, which is a defense filing offered in mitigation rather than a set of findings the court tested. It described Gaines as a 67-year-old man with a long list of medical conditions, multiple strokes, and cognitive impairment documented by an Emory University neuropsychologist, and it argued that co-conspirators used his dormant business for an application he never prepared and withdrew the proceeds themselves.6 The judge imposed five years' probation with no prison time, set a $100 special assessment, and waived any fine after finding Gaines could not pay one.1 The restitution stayed on the books.

What that debt recovered is documented too. By August 2023 the balance had fallen from $806,710 to $762,564.57, and the government moved to garnish $12,812.14 from the proceeds of a civil settlement Gaines was owed through a law firm.7 The court terminated his probation early in July 2025, roughly fourteen months short of the full term, while the restitution obligation, now payable to the SBA, continued on its own.2

A whole ring

Gaines was one defendant carved out of a twenty-defendant fraud ring prosecuted as United States v. Thomas in the same district. On December 10, 2025, the U.S. Attorney filed a single omnibus motion asking the court to substitute the SBA for five different lenders across the entire case family.8 The motion itemized twelve fraudulently obtained loans, loan number by loan number, and named the lenders without euphemism: Harvest Small Business Finance, CDC Small Business Finance, Cross River Bank, Customers Bank, and Celtic Bank.8 The SBA had purchased the guaranty on every one. On December 31, 2025, the court granted the motion, and the attached table showed the same result twelve times: $0.00 remaining due to any original lender, about $9.3 million in restitution redirected to the SBA.9

The pattern is not regional. In Hawaii, Martin Kao, the CEO of the defense contractor Navatek, was sentenced in February 2025 to 87 months and ordered to pay $12,841,490 in restitution, payable in full to the SBA at the same Denver office that receives the Gaines payments.10 Kao's companies had defaulted on the loans in 2021, and the SBA, as guarantor, bought the defaulted loans, which shifted the loss onto the SBA.11 Kao's sentencing statement said the money "was repaid in full so, in fact, there was no loss to Central Pacific Bank and/or Radius Bank." As to the banks, that was accurate: the government's factual basis says his companies defaulted and the SBA bought the loans. The loss sat with the SBA.11

The fee side surfaces in the record too. In a Washington, D.C. identity-theft case, the government's sentencing memorandum spelled out that the SBA paid the originating lenders' processing fees on fraudulent loans, $33,600 to Newtek and $33,450 to ReadyCap, and rolled those fees into the restitution figure.12 The lenders processed loans built on stolen tax returns and payroll records, and the government paid them their fees.

The borrower defaulted, the borrower was prosecuted, and the borrower still owes the money. The bank that originated the loan collected a fee, was repaid its principal by the SBA, and appears in the restitution order only until the government files the paperwork to write itself in. Across every loan in the Thomas ring, the amount still owed to the lenders came to $0.00.9

Documents cited

Notes

  1. Judgment in a Criminal Case, United States v. Andre Lee Gaines, N.D. Ga. No. 1:21-cr-00206 (imposed Oct. 5, 2021; entered Oct. 8, 2021); source page. ↩1 ↩2 ↩3
  2. Order Substituting Restitution Payee, United States v. Andre Lee Gaines (July 15, 2025); source page. Order Terminating Probation (July 17, 2025); source page. ↩1 ↩2 ↩3
  3. Motion to Substitute Restitution Payee and Brief in Support, United States v. Andre Lee Gaines (July 14, 2025), citing 18 U.S.C. § 3664(j)(1) and reciting the SBA's $862,914.47 guaranty purchase ($806,710.00 principal, $32,003.17 interest, $24,201.30 processing fees) from Cross River Bank; source page. ↩1 ↩2 ↩3 ↩4 ↩5 ↩6
  4. U.S. Small Business Administration, Office of Inspector General, "SBA's Guaranty Purchases for Paycheck Protection Program Loans," Report 24-20 (July 9, 2024), reporting 203,101 PPP loans totaling $7.3 billion charged off between July 2021 and December 2022 and finding ineffective SBA oversight of lender communication, servicing, and debt-collection activities, Source document. ↩1 ↩2 ↩3
  5. Guilty Plea and Plea Agreement, United States v. Andre Lee Gaines (June 17, 2021); source page. ↩1 ↩2
  6. Defendant's Sentencing Memorandum, United States v. Andre Lee Gaines (Sept. 29, 2021). This is a defense filing offered in mitigation, not adjudicated findings. Source page. ↩
  7. Motion for Entry of Final Disposition Order on Garnishment, United States v. Andre Lee Gaines (Aug. 24, 2023), reciting an outstanding restitution balance of $762,564.57 as of Aug. 2, 2023 and a $12,812.14 garnishment of settlement funds held by Morgan & Morgan; source page. ↩
  8. Omnibus Motion to Substitute Restitution Payees and Brief in Support, United States v. Darrell Thomas, Teldrin Foster, et al., N.D. Ga. No. 1:20-cr-00296-JPB (Dec. 10, 2025), itemizing twelve loans across Harvest Small Business Finance, CDC Small Business Finance, Cross River Bank, Customers Bank, and Celtic Bank. ↩1 ↩2
  9. Order Substituting Restitution Payees, United States v. Darrell Thomas, et al. (Dec. 31, 2025), granting the omnibus motion and reflecting $0.00 remaining due to any original lender across the twelve loans, Source document. ↩1 ↩2
  10. Judgment in a Criminal Case, United States v. Martin Kao, D. Haw. No. 1:21-cr-00061-LEK (imposed Feb. 13, 2025; filed Feb. 20, 2025), ordering $12,841,490 restitution payable in full to the U.S. Small Business Administration (SBA/DFC, Denver, Colo.); source page. ↩
  11. Government's factual-basis letter, United States v. Martin Kao (Dec. 2021), stating that Navatek and its subsidiary defaulted on the PPP loans in 2021 and that the SBA purchased the defaulted loans it had guaranteed. Kao's contrary "repaid in full" assertion appears in his sentencing statement. ↩1 ↩2
  12. Government's Sentencing Memorandum, United States v. Elias Eldabbagh, D.D.C. No. 1:21-cr-00523-TNM, stating the SBA paid lender processing fees of $33,600 (Newtek) and $33,450 (ReadyCap) on the fraudulent loans, folded into the $2,452,050 restitution request. ↩
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