Former CU CEO & Controller Plead Guilty in $5 Million Fraud Scheme

Two former credit union executives admitted in federal court that they stole more than $5 million from the $35.4 million Southern Pine Credit Union, the U.S. Attorney’s office in Valdosta, Ga., said.

The credit union’s former Controller Teresa Paulo of Valdosta pleaded guilty on Thursday to one felony count of bank fraud and one felony count of aggravated identity theft in federal court. The former president/CEO Leah Lehman, 63, of Valdosta, also pleaded guilty to one felony count of bank fraud and one felony count of aggravated identity theft on Oct. 26, prosecutors said.

Lehman, who became CEO at the Valdosta-based credit union in 1990, began her fraud scheme in June 2003, when she created a share secured loan in a Southern Pine account using the name and Social Security number of a member without that individual’s knowledge, according to her plea deal. From February 2012 to May 31, 2020, she paid off the loan and rebooked it multiple times with additional advances. Lehman took the funds and put them in a joint share draft account she had with the member. She then used the money to pay for a boat, a hunting club share, personal expenses and gifts to family members. This loan was repaid.

However, Lehman created another share secured loan in another individual’s name without that member’s knowledge. Although she paid off that loan, she rebooked it multiple times for personal spending. To conceal her theft, Lehman created false credit transactions using the names and passwords of Southern Pine employees, according to the plea deal. The due dates on these transactions were advanced, which prevented these loans from appearing on quarterly NCUA Call Reports and enabled Lehman to defer or not make payment on these loans.

Following these transactions, Lehman also created debit entries to put the loans back on the accounts, which would often include interest accrued on the outstanding loans. Lehman made additional fraudulent loan advances simultaneously with those entries to advance the loan dates. She reflected the loans as being paid off at the end of the quarter to prevent possible detection of artificial growth in the Southern Pine loan portfolio, according to the plea deal.

In total, the drafts needed to pay off the loan balances at each quarter grew to $4,112,870, excluding payments and interest, as of May 31, 2020.

Paulo committed a similar fraud scheme to Lehman’s, prosecutors said.

In October 2011, Paulo created a share secured loan in a Southern Pine account using the name and Social Security number of a member without that individual’s knowledge. From November 2011 until May 2020, Paulo took out additional advances on the loan as well as additional loans from the account. She would then transfer the loan funds into a joint account for personal spending purposes, according to a plea deal.

She created another share secured account using the personal identity of another member and would pay off the loan and rebook it multiple times with additional advances, using the funds for her personal expenses or to electronically transfer money into her family’s accounts.

Like Lehman, Paulo concealed her schemes by creating false credit transactions using the usernames and passwords of Southern Pine employees to simulate the payoff of the loans, which would advance their due date.

She also created debit entries using other members’ usernames and passwords to put the loans back on the accounts, which would often include interest accrued on the outstanding loans.

The drafts needed to pay off the loan balances at each quarter grew to $1,233,201, excluding payments and interest, as of May 31, 2020, according to prosecutors.

Paulo made $7,736 in legitimate payments on the loan balances.

Lehman and Paulo were fired in June 2020 after the credit union was placed under NCUA conservatorship. Southern Pine was released from conservatorship in March 2022.

Sometime in the first or second quarters of 2020, through sources outside of Southern Pine, the NCUA became aware of the fraudulent transactions involving Lehman and Paulo.

Both women face a maximum of 30 years in prison for bank fraud and a mandatory two years in prison for aggravated identity theft, to be followed by a maximum of five years of supervised release and a $1 million fine. Since they both agreed to a plea deal and admitted their guilt, however, they are unlikely to receive the maximum sentence.

Lehman’s sentencing hearing is scheduled for Feb. 28. Paulo’s sentencing hearing has not been scheduled yet.

READ MORE: Leah Lehman’s and Teresa Paulo’s Plea Deals.