A grand jury in Bergen County, N.J., has returned an indictment against a former credit union employee and 11 others, charging that they participated in what eventually became a more than $3 million mortgage fraud against the $336 million Paragon Federal Credit Union.
The Montvale, N.J., credit union did not return several calls requesting comment on the case.
According to a statement from the prosecutor's office and court records, the alleged fraud conspiracy revolved around two mortgage brokerage firms with which the CU did business: AOR Consultants and Apex Consultants. Both of the firms operated out of the same offices in North Bergen, N.J., and both firms used a loan broker named Flavio Cardoza.
The prosecutor alleged that the firms presented loan applications, filled out by other conspirators with false information, to Dawn Woolbert, a loan coordinator for the CU's residential mortgage division. Woolbert's duties included verifying that loan applicants were eligible for membership in the CU as well as the expense-to-income ratios and loan-to-value ratios that would qualify them for their loans. Prosecutors alleged that she became the inside source that made the fraud successful.
Not only did Woolbert falsely certify that the applicants were eligible for CU membership, she also gave information back to the other conspirators about what the applicants' income levels and property values would have to be for them to qualify for the loans, the prosecutor charged.
Acting on her information, the conspirators would then resubmit the loan applications with the income data that Woolbert told them they needed to have and a report from the conspiracy's own appraisal firm to back up the property's value.
"Osvaldo Riveron and Flavio Cardoza would hire Peter Lamicella of Lighthouse Appraisals LLC, located in Tom’s River, N.J., to prepare the appraisal report for the property," the prosecutor's office charged. "Riveron and Cardoza would instruct Lamicella to provide an appraisal report directly to Paragon with property values provided by Woolbert so they appeared to meet Paragon's loan amount to property value ratio."
By the time the loan applications were complete, many of them had false financial information, often drawn from fictitious W-2 and some fabricated income tax returns, the prosecutor's office said.
According to NCUA records, the credit union holds roughly $7 million in residential mortgage loans on its books and services another $66 million that it sold.
The prosecutor's office didn't reveal much detail about how Paragon discovered the fraud but in a statement said that Paragon had uncovered it during an audit.
"During a routine audit of their residential mortgage loans, bank investigators discovered that an unusual amount of residential mortgage loans were delinquent and promptly notified the Bergen County Prosecutor's Office, White Collar Crime Unit," the office said.