An East Stroudsburg, Pa., man pleaded guilty last week to a wire fraud charge in connection with the $136 million fraud scheme that bankrupted Pine Brook, N.J.-based U.S. Mortgage Corp. and its subsidiary, CU National Mortgage LLC, U.S. Attorney Paul J. Fishman announced.
Leroy Hayden, 47, the servicing manager of U.S. Mortgage from 2004 through Jan. 28, 2009, pleaded guilty before U.S. District Judge Katharine S. Hayden to one count of wire fraud conspiracy.
According to documents filed in this and related cases and statements made in federal court, Hayden conspired with Michael J. McGrath Jr. – then the president and controlling shareholder of closely held U.S. Mortgage – and several others to fraudulently sell Fannie Mae hundreds of loans belonging to various credit unions. He also provided numerous reports to credit unions falsely stating that loans that had been sold were still in the credit unions' portfolios, and falsified records, at McGrath's direction, to conceal these fraudulent sales. Hayden also admitted that he modified data in U.S. Mortgage's servicing system to help carry out the scheme.
The pace of the fraudulent sales increased during 2008 and early 2009, the U.S. Department of Justice says. On Jan. 27, 2009, dozens of law-enforcement agents executed a search warrant at U.S. Mortgage and CU National's Pine Brook headquarters. In the following weeks, U.S. Mortgage and CU National commenced bankruptcy proceedings.
McGrath pleaded guilty on June 12, 2009, to mail fraud, wire fraud and money laundering conspiracy charges, admitting that he hatched his scheme to prop up his company. He further admitted that he fraudulently sold hundred of loans belonging to various credit unions to Fannie Mae and used the proceeds to fund U.S. Mortgage's operations, his personal investments and investments he made on U.S. Mortgage's behalf.
The charge to which Hayden pleaded guilty carries a maximum potential penalty of five years in prison and a maximum fine of $250,000, or twice the amount of loss suffered by the victims of the conspiracy. His sentence is also expected to include restitution to the victims of the conspiracy, presently estimated at $136 million. His sentencing is scheduled for July 27.
SOURCE: U.S. Department of Justice