VALDOSTA, Ga. – The former president and the former controller of Southern Pine Credit Union in Valdosta both pleaded guilty to long-running multimillion-dollar bank loan and aggravated identity theft schemes, according to the U.S. Attorney’s Office for the Middle District of Georgia.
Teresa Paulo, of Valdosta, pleaded guilty to one count of bank fraud and one count of aggravated identity theft. Co-defendant Leah Lehman, 63, of Valdosta, pleaded guilty to one count of bank fraud and one count of aggravated identity theft on Oct. 26.
According to the U.S. Attorney’s Office, both women face a maximum of 30 years in prison for bank fraud, and a mandatory two years in prison in addition to any other prison term imposed for aggravated identity theft, to be followed by a maximum of five years of supervised release and a $1,000,000 fine.
Sentencing Scheduled
With U.S. District Judge W. Louis Sands presiding over this case, Lehman’s sentencing date is scheduled for Feb. 28, 2024. Paulo’s sentencing date will be determined by the court, the U.S. Attorney’s Office said.
The defendants are not eligible for parole.
In June of 2020 NCUA placed the then $46.4-million Southern Pine CU into conservatorship, but the credit union exited conservatorship in March of 2022. As of its Sept. 30 call report, the credit union had $35.4 million in assets and 1,445 members.
‘Members Put at Risk’
“As leaders of this credit union, the defendants knowingly put their members—local paper mill employees and their families—at great risk with their complex schemes to enrich themselves,” U.S. Attorney Peter D. Leary said in a statement. “I want to thank the FBI and FDIC investigators for unraveling their carefully engineered criminal fraud and helping us hold them accountable.”
According to court documents, Lehman served as president of Southern Pine Credit Union (SPCU) in Valdosta from 1990 to 2020. Paolo was SPCU’s controller from Oct. 2011 to June 2020. SPCU’s members are employees of the local paper mill and their families.
“Lehman and Paolo were both authorized to originate all types of loans, were responsible for filing quarterly reports to the National Credit Union Administration (NCUA) and had access to all SPCU employees’ usernames and passwords for all SPCU computers and software,” the U.S. Attorney Office said.
Fraud Began in 2003
According to the government, Lehman began her fraud in June 2003 when she created a share-secured loan in a SPCU account using the name and social security number of a member without that individual’s knowledge.
“From Feb. 2012 to May 31, 2020, Lehman paid off the loan and rebooked it multiple times with additional advances,” the U.S. Attorney’s Office said. “She would take the proceeds and put them in a joint share draft account she had with the individual, using the proceeds to pay for a boat, a hunting club share, personal expenses and gifts to family members. This loan was repaid in full. However, Lehman created another share secured loan in another individual’s name without their knowledge and would also pay off the loan and rebook it multiple times for personal spending.”
Concealing the Fraud
To conceal the activities, prosecutors said Lehman created false credit transactions using the names and passwords of SPCU employees.
“These transactions would advance the due date on the loans, which prevented these loans from appearing on quarterly call reports to the NCUA and allowed Lehman to defer or not make payment on these loans,” the U.S. Attorney explained. “Following these transactions, Lehman created debit entries to put the loans back on the accounts, which would often include interest accrued on the outstanding loans. She made additional fraudulent loan advances simultaneously with those entries to advance the loan dates. She reflected the loans as being paid off at the end of the quarter to prevent possible detection of artificial growth in the SPCU loan portfolio.”
In total, the drafts needed to pay off the loan balances at each quarter grew to $4,112,870.63, excluding payments and interest, as of May 31, 2020, according to the U.S. Attorney’s Office.
Similar Fraud
Paulo committed a similar fraud scheme to Lehman, prosecutors said, using a similar method of concealment by creating false credit transactions and using the usernames and passwords of SPCU employees to simulate the payoff of the loans, which would advance the due date on the loans.
According to the U.S. Attorney’s Office, the drafts needed to pay off the loan balances at each quarter grew to $1,233,201.77, excluding payments and interest, as of May 31, 2020. Paulo made $7,736.16 in legitimate payments to the loan balances.
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