Mother and Son Admit $14 Million Credit Union Fraud
|U.S. Attorney’s Office August 21, 2012|
Richard S. Hartunian, United States Attorney for the Northern District of New York, and Clifford C. Holly, Special Agent in Charge of the Albany Division of the Federal Bureau of Investigation, make the following announcement:
Scott A. Lonzinski, 32, of Clifford Township, Susquehanna County, Pennsylvania, and his mother, Laura Conarton, 46, of Great Bend, Susquehanna County, Pennsylvania, pled guilty today in United States District Court to the felony crime of bank fraud.
In entering their guilty pleas before Senior United States District Court Judge Thomas J. McAvoy, both Lonzinski and Conarton admitted that, between July of 2009 and February of 2011, they perpetrated an elaborate fraudulent scheme to obtain a total of 10 loans from the Broome County Teacher’s Federal Credit Union (BCT) in the aggregate amount of over $14 million.
As part of the scheme, Lonzinski and Conarton created numerous phony documents, including false bank statements; forged signatures of people; made numerous false and fraudulent statements; and created a fictitious persona. The purpose of the scheme was to convince BCT that Certificates of Deposit allegedly held by Lonzinski at People’s National Bank, which were pledged as security for the loans from BCT, had a value at least equal to the amount of loans obtained from BCT. In fact, the Certificates of Deposit were fraudulently made and had no value.
During the period of the fraud, Lonzinski owned and operated a construction business where Conarton worked as manager and bookkeeper. The loan proceeds were used by Lonzinski and Conarton to finance Lonzinski’s construction business, to purchase vehicles for his business, to purchase and remodel Lonzinski’s primary residence, to acquire personal automobiles for Lonzinski, Conarton, and other family members, and to pay other business and personal expenses.
When the fraudulent scheme was uncovered during an examination by the National Credit Union Administration (NCUA), the federal agency that regulates and insures federally chartered credit unions, NCUA assumed responsibility for the day to day operations of the credit union. The assets of BCT were eventually sold to Visions Federal Credit Union. No members/clients of BCT lost money as a result of the liquidation of BCT.
During the investigation, bank accounts, real property, and automobiles were seized from the defendants. As a result of the seizures, more than $5 million in cash and property has been recovered, and will be used to make partial restitution in the case.
Lonzinski and Conarton both face a maximum sentence of 30 years’ imprisonment, and a maximum fine of $1 million. Sentencing is scheduled for Lonzinski December 19, 2012 and Conarton December 20, 2012.
The case was investigated by the Federal Bureau of Investigation, Albany Field Division, and is being prosecuted by Assistant United States Attorney Thomas P. Walsh.
The successful prosecution of Lonzinski and Conarton is part of an ongoing effort by the United States Attorney’s Office, the Federal Bureau of Investigation, and other federal law enforcement agencies to combat financial fraud. In just the last two years, the United States Attorney’s Office has resolved four other cases involving fraud losses over a million dollars, and brought two additional cases that each allege over $7 million frauds1:
- Matthew John Ryan was sentenced to 121 months’ imprisonment based upon his plea to one count of securities fraud. As the owner of American Integrity Financial Co., Ryan sold investors contracts promising a guaranteed fixed rate of interest for a fixed term. Ryan obtained a mail drop to create the false impression that American Integrity had an office in Manhattan, used the names of fictitious employees in correspondence with investors, and falsely represented that their investments were insured up to specific dollar amounts. Ryan used more than $4.8 million that investors invested in American Integrity for multiple purposes he concealed from investors, including to repay real estate loans, to pay other investors’ purported returns or interest using the principal investments of other investors, and to pay his own personal expenses.
- Arthur Strasnick was sentenced to imprisonment for 60 months and ordered to pay restitution of about $2 million upon his conviction of two counts of mail fraud and one count of aggravated identity theft. As president and CEO of Backstreet Associates, Inc., Strasnick obtained money from investors based on false representations relating to guaranteed rates of return, sent investors fabricated monthly account statements, and made periodic payments to investors that he falsely represented to be interest earned on their investments. Strasnick also defrauded homeowners by obtaining money representing equity in their homes through mortgages obtained by false pretenses and used the personal identification information of another to open and use an American Express credit account.
- Christopher Bass was sentenced to imprisonment for 151 months and ordered to pay restitution of over $5.3 million upon his conviction of wire fraud and attempted tax evasion. Bass ran a fraudulent investment program involving the purchase and sale of securities to investors under the names Revisco Finance and Swiss Capital Harbor. More than 300 investors suffered pecuniary loss. Bass promised investors that their money would be sent to Europe for investment, but most of the deposits were disbursed to Bass or used to pay for his personal expenses, used to repay investors who demanded a return of their initial investment or distribution of the income allegedly earned, and/or used to pay for expenses incurred in operating the fraudulent investment program. Bass caused false periodic account statements to be issued that reported monthly returns and account balances and falsely represented that investments were insured, risk free, or protected by a cash reserve account.
- Thomas E. Kelly was sentenced to imprisonment for 51 months upon his conviction of mail fraud. Kelly was a financial consultant who recommended that clients sell off legitimate securities investments in order to invest in a fictitious entity Kelly called Seneca Group. Kelly promised investors a stable, secure investment, but used the money invested in Seneca Group to make risky investments in the stock market and pay personal expenses. Investors lost about $1 million.
- Timothy M. McGinn and David L. Smith are scheduled for trial in November on a 30 count indictment charging them with mail and wire fraud, securities fraud, and filing false income tax returns. The indictment alleges that McGinn and Smith misled investors regarding the safekeeping and use of investor money, the risks of the offerings, the performance of the underlying income streams, the source of investor payments, and the improper diversion of investor money in order to obtain money from investors and enrich themselves, with a loss to investors of about $8 million.
- William A. Stehl and Richard M. Rossignol are charged with conspiracy to commit mail and wire fraud and other offenses in an indictment that alleges that they used false representations and promises to persuade others to invest money in companies that were purportedly developing or utilizing various applications of an alternative energy source, and thereby obtained more than $7 million from more than 300 investors, with most of the money used for personal expenditures by Stehl and Rossignol.
United States Attorney Hartunian said, “The road to financial ruin is paved by schemers who think they are just sly enough to take the money, line their pockets, and make enough to satisfy obligations before they are caught. But people suffer, often losing their savings, their retirement, or the money they need to meet expenses. We are dedicated to combating financial fraud, both to protect and assist those who are or would be victimized and to stop the far-reaching effects that undermine our financial system.”
Further inquiries may be directed to the United States Attorney’s Office, Binghamton branch office, at (607) 773-2887.
1 The pending indictments contain mere accusations, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.