PNC pays $7.1M to settle loan case
nFeds accuse bank of failing to follow prudent procedures in loans to Uni-Mart convenience stores. BY TIM MEKEEL, Business Editor
PNC Bank has agreed to pay $7.1 million to settle U.S. Justice Department allegations that it didn't do its homework.
The Justice Department had alleged that PNC "failed to engage in prudent underwriting practices" when lending to buyers of Uni-Mart convenience stores in 2005.
The 64 loans to buy 98 stores, primarily in the mid-Atlantic region, were guaranteed by the U.S. Small Business Administration.
The deals were done under the SBA's Preferred Lender Program.
Of the 64 loans, 36 have defaulted, triggering SBA's obligation to pay PNC 75 percent of the balance of the defaulted loans.
The Justice Department did not disclose the amount of the loans in question.
Nor did it disclose the locations of the stores, although State College-based Uni-Mart once had dozens of stores in Lancaster County.
Under the SBA Act, banks can partner with the SBA to make loans to qualified small businesses.
Banks that participate in the SBA's Preferred Lender Program have the authority to make and close such loans without prior approval of the SBA.
However, in doing so, banks are required to exercise prudent lending standards.
The Justice Department alleged that PNC "relied upon unaudited financial statements without further verifying whether the information contained in the financial statements was accurate."
Pittsburgh-based PNC did not admit or deny any wrongdoing.
However, as part of the settlement announced last week, PNC has agreed to take steps to prevent similar events in the future.
Uni-Marts came to Lancaster County in a major way in 1991, buying 141 GettyMart stores in Pennsylvania and Virginia. That gave Uni-Marts 25 stores here.
Uni-Marts filed for bankruptcy in 2008.