A federal judge ordered on Wednesday the dismissal of a highly-contested legal battle between the $30 million Southern Pine Credit Union in Valdosta, Ga., and insurance companies over a multimillion-dollar claim tied to a $5.4 million embezzlement scheme by former President/CEO Leah Lehman and former Controller Teresa Paulo.
“Plaintiff’s claims against the Defendant having now been resolved, the Clerk of Court is directed to close this case,” U.S District Court Judge W. Louis Sands in Valdosta wrote in his order.
Attorneys for both sides and the credit union did not respond to a CU Times request for comment.
In June 2022, Southern Pine Credit Union (SPCU) filed a lawsuit against three insurance companies, Southwest Marine and General Insurance Company, Coaction Global Inc. and Prosight Specialty Insurance, in June 2022. The credit union’s lawsuit argued the insurance companies’ denial of coverage was unlawful because it was contrary to the SPCU’s reasonable expectations that hidden and undetected embezzlement would be covered. The credit union sought $3,746,000 in damages.
Paulo’s fraudulent loans were valued at $1,233,201, while Lehman’s totaled $4,238,317.
In July 2022, the insurance companies filed a counterclaim against SPCU, alleging previous statements it made were fraudulent regarding the safeguarding of loans.
On Sept. 1, 2022, Judge Sands ordered a discovery process allowing both sides to request documents and conduct depositions.
Over the next three years, however, the discovery process was delayed repeatedly due to vigorously contested discovery disputes between the credit union and insurer over certain documents, including privileged documents and other issues related to depositions. Judge Sands issued multiple rulings to resolve these conflicts, court filings showed.
By May 2025, the parties participated in an all-day mediation session in Jackonsville, Fla. While the discussions were constructive, they did not lead to resolution. Nevertheless, both sides agreed to continue “resolution-related dialogues” with the assistance of the third-party mediator while continuing the litigation, according to court documents.
In July, Judge Sands granted a joint request by the parties to extend and clarify certain deadlines but warned he would grant no more deadline extensions. He also scheduled a tentative trial date for May 4, 2026.
Lehman’s embezzlement began in June 2003 when Lehman created a loan account in her husband's name, took an advance of $7,850 and transferred the proceeds into the joint share draft account she shared with her husband. Over the next 17 years, she used her joint accounts, her husband's account and accounts belonging to other family members to take out fraudulent loans. She used those funds for personal expenses and to cover up previous thefts.
By 2006, Paulo began transferring funds from relatives' accounts. A year later, she created a loan account and took advances to pay credit card bills. In 2014, she created approximately $42,000 in fraudulent loans, and by Jan. 1, 2015, that amount grew to approximately $103,000. In successive one-year periods, however, the balance grew to approximately $270,000, $529,000, $750,000, $945,000 and $1,170,000.
In October 2023, Lehman and Paulo were charged with multiple felonies. They each pleaded guilty to bank fraud and aggravated identity theft in November.
Lehman is serving a six-year federal prison sentence in Marianna, Fla. She is scheduled to be released in April 2029. Paulo is serving a five-year federal prison sentence in Fort Worth, Texas. She is scheduled to be released in October 2028.
Peter Strozniak can be reached at pstrozniak@cutimes.com.
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