Philadelphia woman charged in micro loan fraud

A Philadelphia businesswoman who specialized in obtaining "micro loans" of less than $30,000 for small and start-up businesses was accused by a federal grand jury yesterday of stealing $664,544 from banks and borrowers with which she worked.

Linda M. Brusco, also known as Linda M. Karl and Linda Giordano, the president and an owner of Partners for Small Business Development, was indicted on one count of mail fraud and 27 counts of loan fraud in a scheme prosecutors allege ran from May 2002 through December 2005.

Brusco, 46, of the 4000 block of Manayunk Avenue in Manayunk, could not be reached for comment yesterday, and the phone of her business was disconnected.

According to the indictment, Partners has operated since 2004 in King of Prussia, South Philadelphia and Manayunk.

Assistant U.S. Attorney Jennifer J. Chun said Brusco had an initial appearance yesterday before a federal magistrate judge and was released on an unsecured $10,000 bond pending an arraignment and bail hearing.

According to the indictment, Brusco, then known as Linda Karl, created the nonprofit in 2001 as a way for small businesses to get access to loans they might otherwise be denied.

A consortium of banks - including United Bank of Philadelphia, Beneficial Savings Bank, National Penn Bank, Pennsylvania Business Bank and Advance Bank - working with Brusco approved the loans, and each bank deposited a pro-rata share of the loan amount in a Partners bank account.

Under the arrangement, the indictment continues, Brusco and Partners distributed loan funds to the borrowers, who repaid the loans into a Partners account for redistribution to the banks.

Beginning in 2002, the indictment alleges, Brusco began submitting false loan applications to the banks without the businesses' knowledge or consent. Brusco allegedly withdrew money for personal use and also used the banks' money to make loan repayments to conceal the stolen money.

Brusco has been involved in small business development in the Philadelphia region since 1989, when she obtained her master's degree in business administration from La Salle University and spent the next four years as executive director of La Salle's Small Business Development Center.

In 1993, she became vice president for planning and development for Philadelphia Commercial Development Corp. (PCDC), the city-created agency to encourage growth of small community-based businesses.

It was at PCDC in 1994 that she created the Philadelphia Small Business Micro Loan Fund, which became the model for Partners when she and her husband struck out on their own in 1999.

She then became a regular at county and local community economic development meetings throughout Southeastern Pennsylvania, promoting Partners' access to micro loans for small businesses.