Bloomington Accountant Sentenced for Bank Fraud

MINNEAPOLIS—Earlier today in federal court, the former senior vice president and chief financial officer for Centennial Mortgage and Funding Inc. (“Centennial”), was sentenced for defrauding a bank of approximately $8 million through material omissions and misrepresentations regarding Centennial’s operations and mortgage loans. United States District Court Judge David S. Doty sentenced Joseph W. Traxler, age 64, of Bloomington, to 60 months in prison on one count of aiding and abetting bank fraud. In addition, he was ordered to pay $5,395,923 in restitution. Traxler was charged on September 28, 2011 and pleaded guilty on October 27, 2011.

In his plea agreement, Traxler, an accountant, admitted that from 2007 through 2008, he fraudulently aided and abetted Centennial’s use of funds intended for mortgage loans to cover Centennial’s operating losses and to fund the company’s payroll and other expenses.

Specifically, when a home buyer applied to Centennial for a mortgage loan, Centennial requested an advance from one of the lines of credit it held with two different banks. Once the advance was approved, and funds were deposited into an account that Centennial used to fund mortgage loans, Traxler knew that Centennial instead used the money to cover company operating losses. In addition, Traxler admitted kiting checks between the two bank accounts to artificially inflate their balances in order to allow Centennial to continue operating. Check kiting, which is illegal, occurs when someone intentionally writes a check for a value greater than the account balance and then writes another check from a different account with nonsufficient funds to cover the overdrawn account.

Specifically, Centennial, through Traxler and others acting at his direction or in concert with him—(1) made misrepresentations to lenders about the status of existing mortgage loans to induce them to advance additional funds; (2) concealed from lenders existing mortgage loan defaults; (3) refrained from disclosing that the company had secured double funding for 23 mortgage loans; and (4) wrote checks between Centennial’s accounts at different banks in an effort to inflate account balances and thereby allow checks to clear that would have otherwise bounced. Traxler also admitted that others committed these acts, and he did nothing to stop it.

This case was the result of an investigation by the Federal Bureau of Investigation. It was prosecuted by Assistant U.S. Attorneys Tracy L. Perzel and Kimberly A. Svendsen.