Former CU Execs Face Charges in $5 Million Internal Fraud Scheme

A former CEO and a former controller who allegedly embezzled more than $5 million from the $36.9 million Southern Pine Credit Union in Valdosta, Ga., will face felony charges in a federal courtroom in October.

Ex-CEO Leah Lehman has signed a plea deal, according to prosecutors. She has agreed to plead guilty to one count of bank fraud and one count of aggravated identity theft at a scheduled court hearing on Oct. 26, according to court documents filed by prosecutors in U.S. District Court in Valdosta.

Ex-Controller Teresa Paulo is also expected to appear in federal court for a hearing Oct. 26 when she will be arraigned on the charges of one count of bank fraud and one count of aggravated identity theft. At that hearing, she may enter a plea. However, the federal docket showed Paulo’s change of plea hearing has been scheduled for Nov. 2. Prosecutors have not filed court documents as to whether Paulo has agreed to a plea deal.

From June 27, 2003, to May 31, 2020, Lehman allegedly took out fraudulent loans from Southern Pine CU in the names of certain relatives who were unaware of her scheme.

“The defendant then disbursed the money from the loans to an account over which she had partial control and various family members’ accounts for spending purposes by electronic transfer, forging the names of other authorized signatories on drafts from a fictitious account that the defendant created, and using the usernames and passwords of coworkers without lawful authority,” prosecutors wrote in court documents. “She used the money for her benefit and her family’s benefit.”

Prosecutors allege Lehman stole more than $4 million.

Lehman allegedly leveraged her position to conceal the theft from the board of directors and auditors by posting fraudulent deposits to Southern Pine CU share drafts, prosecutors said.

Teresa Paulo began her alleged embezzlement on Oct. 20, 2011, and continued her fraud scheme through May 31, 2020.

She also took out fake loans from Southern Pine CU in the names of certain relatives who were not aware of her scheme, prosecutors said.

Like Lehman, prosecutors said Paulo disbursed the money from the loans to an account over which she had partial control and a family member’s dormant account for spending purposes by electronic transfer.

“The defendant would then transfer the money from the dormant account to her personal account by forging the signature of others on drafts, and then transfer the money from her personal account to an account over which she had partial control for spending purposes, and also by using the usernames and passwords of coworkers without lawful authority,” prosecutors wrote in court documents. “She used the money for her benefit and her family’s benefit.”

Prosecutors allege Paulo embezzled $1.2 million.

Court documents state she also used her position to conceal her scheme from the board of directors and auditors by posting fraudulent deposits to Southern Pine CU share drafts.

The alleged embezzlement was initially detailed in court documents filed by the credit union more than a year ago in federal court that said Southwest Marine and General Insurance Co. declined to pay a $5,471,518 verified proof-of-loss claim stemming from the 17-year internal theft scheme by Lehman and Paulo. In an amended complaint, the credit union is asking a federal judge to order the insurance company to pay a loss claim of $3,746,250, attorney fees, costs, and expenses. That civil case remains pending in U.S. District Court in Valdosta.

Sometime in the first or second quarters of 2020, through sources outside of Southern Pine, the NCUA became aware of questionable transactions involving Lehman and Paulo. By June 11, 2020, they were fired, and the credit union was placed into conservatorship. Southern Pine, which serves 1,370 members, was released from conservatorship in March 2022.