HEADLINE: MCGRATH TO GIVE UP PARKING LOT TO MAKE RESTITUTION
BYLINE: States News Service
DATELINE: NEWARK, N.J.
BODY:
The following information was released by the Credit Union National
Association (CUNA):
Michael McGrath, who pleaded guilty Thursday to swindling credit unions and
others out of nearly $140 million while he headed the now bankrupt U.S. Mortgage
Corp. and CU National Mortgage, will lose his interest in a Hoboken, N.J.
parking lot to help make restitution.
McGrath, who will also forfeit several bank and brokerage accounts, said he
used some of the money obtained by selling fraudulent loans to credit unions to
cover cash flow problems with U.S. Mortgage's operations as well as personal
investments, such as the parking lot (The Jersey Journal June 15 and
Examiner.com June 11). The restitution totals about $13 million. The rest of the
swindled funds is lost in bad investments.
McGrath admitted he directed the servicing manager of U.S. Mortgage to
generate false reports for credit unions stating that their loans--which he had
sold to Fannie Mae--were still in their portfolios, and to modify data in U.S.
Mortgage's servicing system. He also admitted he directed the company's chief
financial officer (CFO) to pay off or make monthly payments to credit unions for
the fraudulent loans, and directed the CFO and a subordinate to falsify
documents.
In other actions involving the case, the company's surety bond insurer,
Zurich American Insurance Co. and one of its units, Fidelity and Deposit Co. of
Maryland, filed a motion Friday with the U.S. Bankruptcy Court seeking relief
from a stay that prevents the company from withdrawing and canceling its surety
bonds on behalf of U.S. Mortgage Corp.
U.S. Mortgage filed for a Chapter 11 bankruptcy on Feb. 23. On April 1, its
subsidiary, CU National Mortgage filed for Chapter 11. The court granted the
bankruptcy applications on April 13. Before the petition date, Zurich issued 13
surety bonds to U.S. Mortgage. Two of the bonds were cancelled before the
petition date.
According to the motion filed in court, Zurich says that U.S. Mortgage and CU
National Mortgage have ceased originating loans and no longer need the surety
bonds to support or guarantee its business operations.
The motion filed noted that since the surety bonds continue to secure U.S.
Mortgage's obligations up to their withdrawal and cancellation, "U.S. Mortgage
is in effect continuing to use the surety bonds as post-petition credit without
Zurich's consent or agreement." Zurich is seeking adequate protection in case
the mortgage company contests the request to withdraw and cancel the bonds.
Zurich is also filing "an administrative priority claim" totaling $21,705.54
for premiums for the surety bonds "that provided a benefit to U.S. Mortgage's
estate after the bankruptcy filing."
McGrath faces 150 to 240 months in prison. He will be sentenced on Oct. 1. |
