Credit Union Employees Help Bust Fraud Ring
Employees at a Pennsylvania credit union are earning kudos from federal law enforcement and prosecutors for helping to crack a nationwide fraud ring.
U.S. Secret Service agents launched an investigation into the alleged ring after workers at the $103 million, state-chartered Erie Community Credit Union in Erie, Penn., reported concerns about what appeared to be phony auto loans paid to a shell company, according to the U.S. Attorney’s Office in Pittsburgh.
As a result of that investigation, a San Francisco-area businessman pleaded guilty last week in U.S. District Court in Pittsburgh for his role in a nationwide automobile loan fraud scheme that allegedly defrauded more than 21 financial institutions of $1 million to $2.4 million, the U.S. Attorney said.
In addition to Erie Community Credit Union, which was defrauded of $59,000, other alleged victims of the scam included the $396 million Erie Federal Credit Union in Erie, Penn., the $5.7 billion Digital Federal Credit Union in Marlborough, Mass., the $6.8 billion First Tech Federal Credit Union in Mountain View, Calif., and the $60 billion Navy Federal Credit Union in Vienna, Va., according to court documents.
Alex K. Philip, 30, of Hercules, Calif., pleaded guilty Oct. 10 to bank fraud and conspiring with a number of other people to obtain phony auto loans, according to court documents. Both charges carry up to 30 years in prison.
During a three-year span, a total of 64 phony borrowers applied for at least 150 bogus loans, the court records said. Prosecutors did not say how many loans were successful.
So far, Philip is the only person charged in case, the U.S. Attorney said. He remains free on an unsecured bond of $20,000 with sentencing set for Feb. 23, 2015.
During the plea hearing in Pittsburg’s U.S. District Court, Assistant U.S. Attorney Marshall Piccinini testified that the alleged scam made up "a large widespread scheme" and that investigators secured search warrants to seize e-mails, which helped them track down the ring leaders.
The alleged scheme consisted of several groups of co-conspirators who were labeled as managers, processors and straw borrowers, the court documents said.
Following Philip’s plea hearing, Piccinini would not divulge how many other people were being sought in connection with the case.
Philip is accused of working with other managers to solicit straw borrowers to willingly lie about their creditworthiness and provide false financial information to processors so the conspirators could obtain auto loans, which were never paid back, the documents said. The alleged crooks used fake tax and wage documents, along with vehicle identification numbers from real cars that were not for sale, the documents said.
The credit unions and banks were told the loans were for vehicles being sold by two ficticious firms, Gold Coast Group Worldwide and AM Auto Groups, and the stolen money was funneled through Philip Investments Inc., which had bank accounts in San Francisco and San Jose, Calif., the U.S. Attorney's Office said