Engaged in fraud against St. Paul Croatian Federal Credit Union.
(Cleveland) - Local businessman A. Eddy Zai was sentenced to more than seven years in prison and ordered to forfeit more than $23 million. This after he previously pleaded guilty to nine counts related to his participation in a fraud against St. Paul Croatian Federal Credit Union, law enforcement officials said.
“Mr. Zai held himself out to the community as a successful entrepreneur, when in reality he was part of a conspiracy that resulted in one of the largest credit union collapses in history,” said Steven M. Dettelbach, United States Attorney for the Northern District of Ohio.
Zai, 44, of Pepper Pike, pleaded guilty last year to one count of conspiracy to commit bank fraud and bank bribery, two counts of bank fraud, three counts of money laundering, one count of bribery and two counts of making false statements of financial institutions.
U.S. District Judge John Adams sentenced Zai to 87 months in prison, followed by five years of supervised release, and ordered him to pay more than $23 million in restitution.
Zai conspired with others, including Anthony Raguz, the former Chief Operating Officer of the St. Paul Croatian Federal Credit Union (SPCFCU), to submit false loan documents to the credit union, defraud the credit union of approximately $16.7 million, and pay bribes and kickbacks to Raguz for using his position at the credit union to approve numerous loans to Zai and the entities and nominee companies he controlled, according to the indictment.
The conduct took place from December 2003 through March 2010, according to court documents.
SPCFCU, located in Eastlake, was placed into conservatorship by the National Credit Union Administration on April 23, 2010. One week later, the NCUA liquidated SPFCFU and discontinued its operations after determining the credit union was insolvent. At that time, SPCFCU served about 5,400 members and was believed to have assets of approximated $239 million.
At the time, Zai owned, operated and controlled The Cleveland Group, LLC (aka the Cleveland Group of Companies) and its many related entities, which included: Cleveland Flooring & Designs, Ltd.; Alpina, Inc.; Cleveland Development Group, LLC; The Cleveland Group, Environmental, LLC; Cleveland Real Estate Group, Inc.; The Cleveland Group Real Estate Division; The Cleveland Group, Excavating Division; Cleveland Management Group, Inc.; The Cleveland Group, Construction Division; The Cleveland Group, Consulting Division; The Cleveland Group, Ltd.; 417, Ltd.; 417 Limited; and Sutton Park, Ltd.
Certain of these entities were created primarily to operate as a “safe haven” for credit union proceeds, while others performed little or no legitimate business despite having loan proceeds intented for Zai’s “business” ventures, according to court documents.
Zai engaged in a scheme to defraud the credit union by, among other things, submitting loan documents for and receiving loan proceeds on behalf of companies that ceased operations. He continued to seek and obtain loan proceeds in the name of non-operating entities even after he directed that no loan payments be made to the credit union. This scheme to defraud the credit union resulted in an approximately $13.7 million loss, according to court documents.
Zai submitted numerous false loan documents to the credit union between March 2008 and July 2009 in order to influence the credit union’s decision to approve loans to the companies he controlled.
Zai gave Raguz numerous cash payments, usually in the form of $100 bills concealed in envelopes and hand-delivered to Raguz at the credit union’s offices, and totaling more than approximately $5,000. The payments were made to both induce Raguz to approve additional fraudulent loan applications and to reward Raguz for having previously approved false loan applications, according to court documents.
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