In exchange for Jungen's guilty plea, federal prosecutors agreed to drop three counts of fraud and other charges, according to the plea deal.

On behalf of the credit unions, Polich opposed the terms of the plea agreement.

“It is difficult for the credit unions to understand why the government is content to allow defendant Jungen to plead guilty to a single count of obstruction of justice when there appears to be ample evidence supporting the charges in the indictment,” Polich wrote in a December 2014 letter to the judge.

She also wrote that given the gravity of the crimes and the harm they caused, the plea agreement failed to hold Jungen accountable for his conduct. Polich also asked the judge to freeze Jungen's real estate assets worth more than $1.5 million, but the disposition of those assets was not addressed in the plea agreement.

Polich said Wednesday the credit unions did not want to comment about Jungen's sentence.

Because he feared that the negative audit review by state and federal regulators in June 2008 would cause the CSMC board to fire him, Jungen ordered the liquidation of $9.2 million private investment pool called P55, which consisted of family members, close friend and business associates, according to court documents.

Polich said the CUSO credit unions were not aware of the P-55 investment pool.

Jungen knew that the board would not approve the $9.2 million cash out to these inside investors because CSMC was performing poorly and in severe financial distress, federal prosecutors said in court papers. For this reason, Jungen approached his long-time friend, business partner and fellow P-55 investor to draft a liquidation letter and back date it to February 6, 2008 in to order to make the June 25, 2008 liquidation appear to be a normal business transaction.

Jungen admitted that the backdated letter was created to falsely indicate that more than 90 days written notice was given to CSMC for liquidation of participation pool P-55 for certain investors, according to court documents.

Jungen resigned shortly after the $9.2 million cash payout was made. In March 2009, CSMC closed its doors, went into receivership and was liquidated at the end of 2009 and in early 2010.

Federal prosecutors said while CSMC was failing, Jungen used his insider position to protect and enrich himself and his friends at the expense of the credit unions who placed their trust in him.

Since its inception in 1997, CSMC was jointly owned by a number of credit unions and a few individual shareholders, including Jungen. The credit unions owned a majority of CSMC stock with a percentage ownership that reached a high of 78%. The CUSO originated, purchased and sold mortgages, many of which were for residential properties throughout Wisconsin and Illinois.

In addition to the stock ownership, the credit unions made funds available to CSMC. The CUSO used those credit union funds and set up loan participation pools to originate mortgage loans. CSMC would hold the loans for a short time until they were sold in the secondary market. Upon sale, each participating credit union received a proportionate share of the interest earn while CSMC held the loan.

The CSMC model was, from the credit unions' perspective, a very appealing opportunity to offer mortgage origination service to their members. What's more, the credit unions' involvement in CSMC participation loan pools was considered low risk because it was expected to short-term and fund only mortgage loans that were pre-sold into the secondary market.

But starting in 2004 and 2005, CSMC allegedly began engaging in three types of fraudulent activities, interest rate skimming, loan shuffling and payment guaranty and pool stuffing fraud, which diverted funds to insiders and away from member credit union investors, according Melvin E. Gavron, a forensic accounting expert. He was hired by the CUSO's credit unions to analyze CSMC 's business and accounting practices.

CSMC's related party, Interim Funding LLC, was engaged as the servicer for most if not all of the loans included in the participation loan pools. The credit unions, however, did not know the existence of Interim Funding LLC. He also found these fraudulent activities enriched the investors of Interim Funding LLC. Jungen was one of six.

In the alleged payment guaranty and pool stuffing fraud, Gavron found that the P55 investment pool, unknown to credit union investors, contained (subprime) loans that were generally too risky to qualify to include in the credit union participation loan pools. Although these riskier loans generated high returns when they performed, over time, many of the loans became non-performing and for other reasons could not be sold into the secondary mortgage market.

What's more, even though many of these P55 pool loans were not performing, investors in the pool were paid high rates of interest as if all of the loans were performing, which meant the P55 investors were guaranteed to receive contractual mortgage payments amounts whether or not payment amounts were actually realized, according to Gavron.

To fund these payments to the P55 pool investors, CSMC used secured bank lines of credit and its own balance sheet liquidity. The CUSO also continued to originate subprime loans hoping to generate enough income to keep the P55 pool payment guaranty scheme going,

However, just prior to the failure of CSMC, management shifted the bad loans out of P55 pool and into the credit union loan pools and paid off the P55 investors. The credit unions, however, lost millions.

“As a result of the liquidation of the P-55 pool and CSMC's subsequent demise, the credit unions sustained damages ranging from a minimum of $5,115.507 (P-55 losses only) to a maximum of $46,151,121 (all CSMC) related losses,” Polich wrote in letter to Judge Adelman, just four days before Jungen's sentencing hearing.

In addition, she noted, four credit unions LifeTime, First Security, Federated and Sunrise were forced to merge out of business as a result of the losses sustained through CSMC.

“Mr. Jungen's conduct has financially endangered and weakened credit unions throughout southern Wisconsin,” Polich wrote. “Jobs have been lost and services to consumers impaired. Credit union members, employees, and the volunteers who serve on credit union boards throughout the region have been cleaning up the mess left behind for years.”

The existing credit unions that were CSMC investors include the $46 million Aurora Credit Union in Milwaukee, the $28 million Enterprise Credit Union in Brookfield, the $14 million First Credit Union in Oak Creek, the $40 million Focus Credit Union, the $97 million Glacier Hills Credit Union in West Bend, the $236 million Guardian Credit Union in West Milwaukee, the $2.6 billion Landmark Credit Union in New Berlin, the $24 million MCU Financial Center Credit Union in Mount Pleasant, the $109 million Prime Financial Credit Union in Cudahy, the $29 million Sherwin Williams Employee Credit Union in South Holland, Ill., the $18 million Southshore Credit Union in Cudahy, the $2 billion Summit Credit Union in Madison and the $963 million Trustone Financial Federal Credit Union in Plymouth, Minn.