The U.S. government has charged an Illinois man with overstating by hundreds of thousands of dollars the value of collateral he used to secure loans from a bank that received funds through the Troubled Asset Relief Program.

Steven Moorhouse of Sandwich, Ill., the former president and majority shareholder of Jefsco Manufacturing, exaggerated the value of amounts due to the company in order to persuade Old Second National Bank in Aurora, Ill., to loan him roughly $1.3 million, the U.S. Attorney for the Northern District of Illinois charged in an indictment filed Tuesday with the federal court in Rockford.

Old Second National, which received $73 million through Tarp, required Moorhouse to pledge Jefsco's accounts receivable as collateral for loans that Moorhouse sought in July 2009, according to the indictment.

In return for making two loans to Moorhouse, the $2 billion-asset Old Second also demanded that he deposit all payments received by Jefsco for receivables into an account with the bank. One of the loans allowed Moorhouse to borrow a percentage of Jefsco's inventory and receivables in the form of cash advances.

Over three months starting in January 2010, Moorhouse deposited checks received by Jefsco into an account at Inland Bank in Oak Brook, Ill., despite his promise to deposit the money with Old Second, officials charged. Throughout that time, Moorhouse also allegedly misrepresented the value of Jefsco's receivables.

U.S. law criminalizes false statements to financial institutions that received bailout funds.

Christy Romero, special inspector general for Tarp, said in a press release that "Moorhouse allegedly fabricated documents and reported false financial information to the bank in order to increase the size of cash advances he could take out on the loans."

"Moreover, rather than deposit customer payments to an account at Old Second as required by his loan agreement, it is alleged that Moorhouse fraudulently transferred the payments to other people and to another bank," she added.

A lawyer for Moorhouse did not respond immediately to a request for comment.

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