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CU System
McGrath sentencing in CU Mortgage Corp. fraud delayed
NEWARK, N.J. (8/12/10)--The sentencing date has been postponed again for former U.S. Mortgage/Credit Union National Mortgage Co. President Michael McGrath, who pleaded guilty last year to the fraud of $139.6 million from 28 credit unions, Fannie Mae, and others. The latest entry on the court docket, for July 21, in McGrath's case in the U.S. District Court of New Jersey says the sentencing was postponed to Oct. 15 due to scheduling conflicts on the part of the U.S. Attorney in the case. U.S. District Judge Katharine S. Hayden is to determine whether to accept the sentencing recommendation of 12 1/2 to 20 years in prison. McGrath remains free on bail until the sentence is imposed. He pleaded guilty in June 2009 to one count of mail and wire fraud and one count of money laundering conspiracy stemming from the fraudulent sales of hundreds of mortgage loans to Fannie Mae without authorization and without paying the credit unions for the sales. McGrath admitted to conspiring with others from January 2004 to January 2009 to fraudulently sell credit union loans and use the proceeds to finance U.S. Mortgage's operations and investments for himself and his company. He also admitted to diverting funds that should have been paid to credit unions for mortgage loans sold without authorization to Fannie Mae to help offset bad investments in mortgage-backed securities (Reuters June 11, 2009). Both U.S. Mortgage and Credit Union National Mortgage, which were based in Pine Brook, N.J., filed for Chapter 11 bankruptcy during February 2009 in Newark. They listed more than $200 million in debts to Fannie Mae and the 28 credit unions. The bankruptcies have led to several lawsuits by credit unions seeking to recoup losses against Fannie Mae and against insurance companies. Since McGrath pleaded guilty in 2009, eight sentencing dates have been set and postponed: Oct. 1, 2009; Nov. 30, 2009; Feb. 1; March 22; April 19, May 18, July 6, and July 27.


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