CLEVELAND -- Local businessman A. Eddy Zai, 44, of Pepper Pike, pleaded guilty to nine counts and agreed to forfeit $16.7 million for his participation in a fraud against St. Paul Croatian Federal Credit Union, law enforcement officials said.
Zai pleaded guilty 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.
Zai conspired with others to submit false loan documents to the credit union, defraud the credit union of approximately $16.7 million, and pay bribes and kickbacks according to the indictment.
"This case is the result of a lengthy joint investigation between the FBI and the IRS. Zai was the single largest recipient of fraudulent loans and significantly contributed to one of the largest collapses of a credit union in U.S. history," said Stephen D. Anthony, Special Agent in Charge of the FBI's Cleveland office.
The fraud and conspiracy took place from December 2003 through March 2010, according to the indictment.
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 believe to have assets of approximated $239 million.
At all times herein, 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 four 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 the indictment.
Zai also 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, according to the indictment.
Zai 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 the indictment.
The indictment alleges further that 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 the former COO of the credit union numerous cash payments, usually in the form of $100 bills concealed in envelopes and hand-delivered to him at the credit union's offices, and totaling more than approximately $5,000, according to the indictment.
The payments were made to both induce the former COO to approve additional fraudulent loan applications and to reward him for having previously approved false loan applications, according to the indictment.
"These defendants' actions were part of a conspiracy that resulted in one of the largest credit union collapse in history," said Steven M. Dettelbach, United States Attorney for the Northern District of Ohio.