CLEVELAND (12/14/12)--The National Credit Union Administration (NCUA)--seeking to receive restitution of funds lost in the collapse of St. Paul Croatian FCU from Cleveland businessman A. Eddy Zai--has asked a federal court in Ohio to grant a motion for prejudgment attachment or schedule an expedited hearing on that motion to avoid impeding its recovery of the losses.
Zai pleaded guilty Nov. 5 to bank fraud that contributed to one of the largest credit union failures in U.S. history. He is to be sentenced in the U.S. District Court in Cleveland on Feb. 5.
He owes $21.895 million, according to an affidavit filed May 21 by one of the individuals working on the liquidation of the credit union. As part of his plea bargain, he is to forfeit $16.7 million, according to the preliminary order of forfeiture filed Nov. 30. It is the largest restitution in Northeast Ohio's history (Cleveland.com Nov. 5).
NCUA, the credit union's liquidating agent, noted that it does not have an executed settlement agreement with defendants Zai, Tina Zai, Ted Vanelli and Cleveland Group of Companies defined in a prejudgment document as holding a promissory note outlining the money flow for any restitution.
NCUA is concerned the parties "may take certain actions with respect to the note that could hinder or delay the liquidating agent or otherwise impede its ability to recover the losses," it said in its motion, filed Dec. 10 with the U.S. District Court Northern District of Ohio Eastern Division in Cleveland.
A prejudgment attachment would place the note under the control of the court and require Cleveland International Fund Ltd. (CIF), whose president is Zai, to make all required payments to the court in accordance with a settlement agreement executed between NCUA, CIF and International Regional Center in late July.
CIF had recently filed a motion to vacate the orders, and NCUA said it is concerned the note remains under the control of the Cleveland Group LTD or the Zais.
Also on Dec. 10, the U.S. Attorney's Office (USAO) withdrew its seizure warrants in the case as part of an agreement with CIF, IRC and other companies affiliated with Zai. The agreement specifies forfeiture or restitution for the collapse--up to $16.7 million-- from CIF, Cleveland International Fund-Flats Ltd., CIF-Hospital; Flats East Hotel LLC, Flats East Office LLC, Flats East Retail LLC and University Hospitals Health System Inc.
The collapse of St. Paul Croatian FCU cost the National Credit Union Share Insurance Fund about $170 million (News Now Nov. 8).
Zai admitted to conspiring with others, including Anthony Raguz, former CEO of the defunct credit union, to submit false loan documents. Raguz pleaded guilty to issuing more than 1,000 fraudulent loans totaling $70 million to about 300 accountholders. He received kickbacks, gifts, and bribes totaling more than $500,000. Raguz was sentenced in November to 14 years in prison and ordered to pay $71.5 million in restitution.
Nineteen people were charged in the scheme. Alleged ringleader Koljo Nikolovski of Eastlake and Skopje, Macedonia, was sentenced in May to 18 years in prison for his role in the fraud.