Nine People Charged in Fraud Scheme Leading to Credit Union Collapse

A 26-count indictment was filed against nine people accused of fraud that led to one of the largest credit union collapses in American history, federal law enforcement officials announced today.

St. Paul Croatian Federal Credit Union in Eastlake, Ohio, went into conservatorship and then forced liquidation in April 2010. That resulted in a $170 million loss to the National Credit Union Share Insurance Fund, making it one of the worst failures in history, according to a subsequent audit.

“This was a major fraud perpetrated against shareholders, including by people whose job was to protect shareholders’ interests,” said Steven M. Dettelbach, United States Attorney for the Northern District of Ohio. “It constitutes self-dealing on the most outrageous scale.

“We are committed to prosecuting everyone involved in this scheme, whether they are senior management of a financial institution or someone who submitted false loan applications,” Dettelbach said.

“The St. Paul Federal Credit Union collapse resulted in one of the largest credit union failures ever investigated in U.S. history,” said Stephen D. Anthony, Special Agent in Charge of the Federal Bureau of Investigation’s Cleveland office. “This complex, large-scale investigation transcended international borders and will continue until all those involved are brought to justice.”

Jose A. Gonzales, IRS Special Agent in Charge, said: “It is IRS-CI’s responsibility when investigating financial institution fraud to focus on the flow of the money, which ultimately leads us to the beneficiaries of this illegal activity. This investigation cuts to the very core of the current economic crisis our nation faces.”

Those charged, including their ages, residences, and the charges filed against them are as follows:

Anthony Raguz, 51, of Mentor, Ohio: one count bank fraud, one count bank bribery, four counts money laundering

Koljo Nikolovski, 48, of Eastlake, Ohio: 10 counts bank fraud, three counts bank bribery, five counts money laundering

Rose Ann Nikolovski, 48, Eastlake, Ohio: seven counts bank fraud, three counts money laundering

Marko Nikoli, 33, Eastlake, Ohio: two counts bank fraud, one count money laundering

John Cendol, Jr., 48, Kirtland, Ohio: one count bank fraud

Ruth Cendol, 55, Kirtland, Ohio: one count bank fraud

Daniel Kocher, 72, Euclid, Ohio: one count bank fraud

Edward Watral, 37, Creston, Ohio: one count bank fraud

Jennifer Cerjan, 33, Orrville, Ohio: one count bank fraud

The indictment alleges that Anthony Raguz was the chief operating officer of St. Paul and, in that capacity, he issued more than 1,000 fraudulent loans totaling more than $70 million to over 300 account holders at St. Paul from 2000 to April 2010.

The indictment also charges Raguz with corruptly accepting more than $500,000 in bribes, kickbacks, and gifts from St. Paul customers who fraudulently obtained loans. The indictment further charges Raguz with four money laundering counts for issuing checks totaling $371,800 drawn on his St. Paul account payable to The Vanguard Group.

The indictment alleges that Koljo Nikolovski fraudulently obtained several loans from St. Paul and Raguz totaling approximately $2.9 million from 2003 through 2005 that were not repaid. The indictment further alleges that Nikolovski was aided and abetted on some of those loans by Rose Ann Nikolovski, his ex-wife, and the other individuals named in the indictment. Koljo Nikolovski was previously indicted in January on bank fraud and money laundering charges and he is currently being held in pretrial detention.

The indictment also charges Koljo Nikolovski with fraudulently obtaining several additional loans in 2009 totaling $2.7 million and failing to repay those as well. The indictment further charges Nikolovski with corruptly giving Raguz $100,000 in exchange for Raguz approving and facilitating the fraudulent loans.

The indictment also charges Nikolovski with five counts of money laundering, including the purchase of two Mercedes Benz automobiles for about $99,000 and $60,000, and a wire transfer of $2.3 million to a bank account in Skopje, Macedonia. Nikolovski’s nephew, Marko Nikoli, is also charged with money laundering involving the purchase of the $60,000 Mercedes Benz. Nikolovski’s ex-wife, Rose Ann, is charged with three money laundering counts.

If convicted, the defendants’ sentences will be determined by the court after review of factors unique to this case, including the defendants’ prior criminal records, if any, the defendants’ role in the offenses and the characteristics of the violations. In all cases the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.

An indictment is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

This case is being prosecuted by Assistant U.S. Attorneys John D. Sammon and Bridget M. Brennan, following an investigation by the Cleveland offices of the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation Division, with the assistance of the Eastlake Police Department.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.