Cleveland entrepreneur A. Eddy Zai will spend more than seven years in federal prison for defrauding $16.7 million from the now-defunct St. Paul Croatian Federal Credit Union.
U.S. District Judge John Adams in Akron on Tuesday also ordered Zai to pay more than $23 million in restitution to the NCUA.
Zai pleaded guilty in November to nine counts of bank fraud, bribery, money laundering for his participation in the $70 million fraud case that led to the collapse of SPCFCU in suburban Eastlake in April 2010.
Authorities said Zai, 44, of suburban Pepper Pike, conspired with others, including Anthony Raguz, the former CEO of SPCFCU, to submit false loan documents and defraud the credit union of more than $16 million from December 2003 to March 2010.
“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, U.S. Attorney for the Northern District of Ohio in Cleveland.
Zai also paid bribes to Raguz to use his position to approve numerous loans to Zai and the companies he controlled, the government said.
More than 15 companies were created to operate as a safe haven for credit union funds. These companies performed little or no legitimate business operations, according to court documents. What’s more, even when these companies discontinued operations, Zai sought to obtain loans and directed that no loan payments be made to the credit union. This scheme resulted in a $13.7 million loss, according to court records.
Zai gave Raguz numerous cash payments totaling $5,000 in $100 bills that were concealed in envelopes and hand-delivered to Raguz at the credit union’s offices.
Raguz was sentenced to 14 years in federal prison in November for his central role in one of the largest fraud cases in U.S. credit union history.
NCUA discontinued SPCFCU’s operations in April 2010 after determining the credit union was insolvent. The credit union served about 5,400 members and had about $239 million in assets.
The credit union’s failure cost the NCUSIF $170 million and led to a lawsuit from the NCUA.
