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Washington
NCUA Ponzi scheme helped close St. Paul Croatian
CLEVELAND, Ohio (3/14/11)—The National Credit Union Administration (NCUA) has filed an adversarial action in the U.S. Bankruptcy Court in an attempt to preclude a debtor from discharging include loans that he allegedly fraudulently obtained from the failed St. Paul Croatian FCU as part of his Chapter 7 bankruptcy filing. The debtor, Stanley Paulic, took out and refinanced several loans between July 10, 2008 and Feb. 25, 2010, all of them allegedly under false pretenses. The NCUA has alleged that Paulic owes the credit union a total of $1.2 million in unpaid loans and is asking that these loans not be discharged based on provisions in bankruptcy code pertaining to debts procured through fraud. Paulic was a co-owner of Arizona-based Integrity Financial AZ, LLC, a onetime real estate investment firm that the Securities and Exchange Commission has said raised over $8 million in funds from nearly 60 investors. Many of the investors were also members of the now-failed credit union. Those investors were sold promissory notes that were “purportedly secured by real estate in Tonopah, Arizona, a town 55 miles west of Phoenix,” the SEC said. Integrity financial used these individual investments to pay dividends to their clients, in a manner SEC characterized as a “ponzi scheme.” The SEC charged Paulic and three others with securities fraud for making false and misleading statements about the safety and performance of a real estate-based investment program. St. Paul Croatian was placed into conservatorship by the NCUA on April 23, 2010, and closed on May 1. The credit union held $238.8 million in funds from 5,400 members when it was closed. The NCUA’s Office of the Inspector General last year reported that fraudulent loans pushed the credit union into liquidation. A Cleveland-based federal grand jury has indicted nine individuals on related fraud charges. (See related March 4 story: Nine indicted in St. Paul Croatian FCU collapse)


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