Former Servicing Manager Pleads Guilty to Fraud Scheme

admin —  May 18, 2010 — 2 Comments

Leroy Hayden, 47, East Stroudsburg, Pennsylvania, plead guilty to a wire fraud charge in connection with the $136 million fraud scheme that bankrupted Pine Brook, New Jersey, based U.S. Mortgage Corp. and its subsidiary, CU National Mortgage, LLC.  Hayden was the servicing manager of U.S. Mortgage from 2004 through January 28, 2009.

According to documents filed in this and related cases and statements made in federal court:

During the relevant period, Leroy Hayden conspired with Michael J. McGrath, Jr. then the President and controlling shareholder of closely-held U.S. Mortgage, and several others to fraudulently sell Fannie Mae hundreds of loans belonging to various credit unions. He also provided numerous reports to credit unions falsely stating that loans that had been sold were still in the credit unions’ portfolios, and falsified records, at McGrath’s direction, to conceal these fraudulent sales. Leroy Hayden also admitted that he modified data in U.S. Mortgage’s servicing system to help carry out the scheme.

The pace of the fraudulent sales increased during 2008 and early 2009. On January 27, 2009, dozens of law enforcement agents executed a search warrant at U.S. Mortgage and CU National’s Pine Brook, New Jersey headquarters. In the following weeks, U.S. Mortgage and CU National commenced bankruptcy proceedings.

As previously reported on Mortgage Fraud Blog,McGrath pleaded guilty on June 12, 2009, to mail fraud, wire fraud and money laundering conspiracy charges, admitting that he hatched his scheme to prop up his company. He further admitted that he fraudulently sold hundred of loans belonging to various credit unions to Fannie Mae and used the proceeds to fund U.S. Mortgage’s operations, his personal investments, and investments he made on U.S. Mortgage’s behalf. McGrath is scheduled to be sentenced on July 6, 2010.

The charge to which Leroy Hayden pleaded guilty carries a maximum potential penalty of five years in prison and a maximum fine of $250,000, or twice the amount of pecuniary loss suffered by the victims of the conspiracy. His sentence is also expected to include restitution to the victims of the conspiracy, presently estimated at $136 million. His sentencing is scheduled for September 27, 2010.

U.S. Attorney Paul J. Fishman stated: “Frauds of this magnitude don’t happen without someone to cook the books and push the paper. Leroy Hayden had to decide whether to go along with his boss’ fraud or alert law enforcement to the scheme. Unfortunately, he made the criminal choice, and he answered for that choice today.”

Fishman credited Postal Inspectors of the U.S. Postal Inspection Service, under the direction of Postal Inspector in Charge David Collins; Special Agents of the IRS Criminal Investigation Division, under the direction of Special Agent in Charge William P. Offord; Special Agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward; and Special Agents of the U.S. Department of Housing and Urban Development’s Office of Inspector General, under the direction of Special Agent in Charge Joseph Clarke, for their investigation leading to this guilty plea. Fishman also thanked the United States Postal Service Office of Inspector General for assisting in the investigation.

The government is represented by Assistant U.S. Attorney Mark E. Coyne of the U.S. Attorney’s Office Economic Crimes Unit.

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2 responses to Former Servicing Manager Pleads Guilty to Fraud Scheme

  1. Not just this post, I really like to appreciate this entire blog site. Thank you for creating awareness of mortgage fraud and real estate fraud throughout the United States!

  2. I was a loan service manager in the 80’s during the last foreclosure bang. I worked for a savings and loan, and managed a 5000 loan portfolio. Much of which was sold to Freddie and Fannie.

    The CEO and CFO wanted to keep kept showing a group of loans on their board reports as still in the portfolio even though they had sold it. I objected, and of course they don’t like people who stand up for what is right. Yes, eventually it cost me my job, again. But I prefer to sleep at night.

    They also didn’t process Chapter 13 Bankruptcy payments to the loans in foreclosure as it “increased” their assets on the books. Being held in a GL account shows as a positive asset, once payments are made, the funds are distributed to the investors.

    There was allot more going on, probably some I wasn’t aware of, but I saw enough.

    Oh, the FDIC closed this company a year after I left. Part of the Savings and Loan collapse..

    While more massive this time, fraud has been around for a long time. This event was from 1986-87..

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