The NCUA, in a 32-count complaint filed May 21 in U.S. District Court in Cleveland, is seeking to recover more than $18.9 million in fraudulent loans and damages from A. Eddy Zai, Zai's wife Tina Zai, and Zai's father-in-law Ted M. Vannelli.
The family is alleged to be the largest recipient of fraudulent loans from the liquidated St. Paul Croatian Federal Credit Union, which was shuttered by the NCUA in May 2010 and cost the NCUSIF $170 million.
Several individuals, including the credit union's former CEO, already have pleaded guilty to federal bank fraud charges related to the collapse.
According to court documents, the Zais and nine business enterprises they owned applied for, and were approved for, several share-secured loans from June 9, 2009 until the liquidation date. However, the deposit accounts “failed to maintain sufficient funds … to properly collateralize the loans” according to the NCUA's compliant.
The complaint details how the Cleveland Group of Companies paid loans with funds obtained from new loans to the tune of nearly $19 million, and “comingled” funds and loan proceeds from St. Paul with accounts at the credit union and at outside financial institutions.
Additionally, the NCUA charges the group with attempting to hinder or delay the regulator's ability to collect on the debts by setting up a new company that purchased Cleveland Group shortly after Zai's Feb. 7, 2012 fraud indictments.
Adam Blackman, a longtime employee and chief financial officer of Cleveland Group, filed Articles of Organization Feb. 1, 2012, to set up a new company, International Regional Center, which bought Cleveland Group assets, including cash on hand, cash in at least 15 bank accounts, equipment and accounts receivable.
The purchase was dated Feb. 12 and was funded by a $22 million unsecured loan that is subordinated to other IRC obligations.
As a result, the Cleveland Group was left with little to no assets from which the NCUA could collect from as liquidating agent of the failed credit union. In the suit, the NCUA demands the IRC sale be voided and all assets returned to The Cleveland Group.
Zai was indicted on 37 criminal counts in February related to the fraudulent loans.
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