Skillman Restaurant Owner Paid Gambling Debts With Federal Loans, AG Says

NEW BRUNSWICK, NJ — A New Brunswick man admitted on Wednesday that he took out a federally-backed $2 million small business loan to open Tusk restaurant in Skillman, but used it instead to pay off his own gambling debts.

John Cheng, 58, of New Brunswick, pleaded guilty this week before U.S. District Judge Claire C. Cecchi in Newark federal court to one count of bank fraud.

In 2007, Cheng took out a Small Business Administration (SBA) loan application for $1.75 million and a commercial loan application for $2 million, purportedly for financing his now-closed restaurant in Skillman, New Jersey. Tusk was briefly open on Rt. 206 South in Montgomery County and served cocktails and New American fare. It has since closed and has now re-opened under different ownership as an Asian-American eatery.

Cheng’s SBA loan application falsely stated that the loan would be used for construction, acquisition of machinery and equipment and working capital, the feds said. After receiving $2,082,229 from the victim bank in March 21, 2008, Cheng used the funds for his own benefit, including paying off gambling debts, sending money to family members and paying a federal tax bill.

The loan applications were submitted to an independent lender through the SBA Loan Guaranty Program, which authorizes the SBA to provide financial assistance to eligible small businesses through loan guarantees to participating lenders. Rather than loan money directly to small businesses, the federal government provides a guaranty to the independent lender that the SBA would repay a percentage of a loan in the event a borrower defaulted.

His is facing up to 30 years in prison and a $250,000 fine. Under his plea agreement, Cheng must pay restitution of $2,657,687.15 to the bank he defrauded and forfeit $1,696,506. Sentencing is scheduled for Oct. 25, 2017.