CEO Kickbacks Greased Wheel Of Massive CU Fraud
CLEVELAND – The former CEO of failed St. Paul Croatian FCU, believed to be in hiding under the federal witness protection program, told authorities he accepted millions of dollars in kickbacks in exchange for arranging tens of millions of dollars in loans to members who had no intention of paying the loans back.
The scheme allowed the leaders of an organized crime ring in Macedonia to siphon as much as $175 million from the one-time $240 million credit union, which was taken over by NCUA last May, according to documents released Thursday. In the first of what are expected to be several criminal charges in the case, a federal grand jury indicted Koljo Nikolovski, believed to be the head of the Macedonian crime ring, on charges of stealing as much as $4 million from the credit union they believe was wired to his account at Kapital Bank AD in Skopje, the capital of the one-time Balkan state. Nikolovski reportedly has been arrested and is being held by authorities in the U.S.
The loan scheme drained so much money from the credit union, NCUA took it over in April the regulator liquidated it a week later estimating that as much as $170 million of depositor funds were missing. The loss is one of the biggest ever recorded by NCUA.
“The collapse of the St. Paul Croatian Federal Credit Union was a tremendous hardship in this community and requires a thorough investigation,” said U.S. Attorney Steven Dettelbach, in announcing the indictment. “Today’s charges demonstrate that we intend to get to the bottom of any criminal wrongdoing that may have contributed to the failure of this financial institution, no matter where the evidence leads.”
Prosecutors charge that the CEO, Anthony Raquez, had been accepting kickbacks or bribes for as long as 10 years in exchange for unsecured loans to members who had no intentions to repay the funds. Initially, the kickbacks or bribes were paid in checks drawn on the credit union, but then the conspirators switched to cash to better conceal the scheme, according to an affidavit filed in the case by Derek Kleinman, a special agent for the FBI.
In order to conceal the scheme, the loans were disbursed through different loan accounts. Checks for the proceeds were made payable to third-party straw borrowers. To further frustrate examiners, the loans were described as “shared secured.” The CEO continued to cover up the scheme by making advances to the various loan accounts or approving new loans, according to prosecutors.
Prosecutors said Nikolovski was approved for $2.5 million of the loans in the names of four people: his wife, his sister and brother-in-law, even though Nikolovski should have been disqualified from additional borrowing after having defaulted one $1 million of loans previously.
Nikolovski, 48, qualified for membership in the credit union because he maintains a home in the Cleveland suburb of Eastlake, where St. Paul Croatian FCU was based, even though he spends most of his time in Skopje, where he oversees a minor crime empire, according to prosecutors.
Nikolovski could not be reached for comment.