November 10, 2023
Fraud Friday – President and Controller of Southern Pine Credit Union Plead Guilty to Fraud
“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,” says U.S. Attorney Peter D. Leary. “I want to thank the FBI and FDIC investigators for unraveling their carefully engineered criminal fraud and helping us hold them accountable.”
In a fraud scheme spanning nearly two decades, Southern Pine Credit Union’s former President and former Controller both decided to plead guilty to one count of bank fraud and one count of aggravated identity theft. They are set to be sentenced in 2024, but the Court has already stated that they will serve at least a mandatory two years in prison and will not be eligible for parole.
Leah Lehman began her career as the President of Southern Pine Credit Union (SPCU) in 1990 and remained there until 2020. Teresa Paulo worked as the credit union’s Controller from 2011 to 2020. Both women were authorized to originate all types of loans, and they were responsible for filing quarterly reports to the National Credit Union Administration. Their positions also gave them access to all SPCU employees’ usernames and passwords for all SPCU computers and software.
Starting in 2003, Lehman created a share secured loan in an SPCU account using a member’s name and social security number without their knowledge. Lehman paid off the loan and rebooked it multiple times with additional advances from 2012 to 2020. The proceeds were put into a joint share draft account she had with the individual. With those proceeds, she paid for a boat, a hunting club share, personal expenses, and gifts for family members.
Lehman paid off the loan in full, but this was only the beginning. She repeated this fraud scheme exactly using another individual’s information this time.
To conceal her fraud, she used the names and passwords of the credit union’s employees to create false credit transactions. The transactions advanced the due date on the loans, preventing the loans from appearing on quarterly call reports and allowing Lehman to defer or not make a payment on the loans.
After these transactions, Lehman created debit entries to put the loans back on the accounts, often including interest accrued on the outstanding loans. Lehman continued making additional fraudulent loan advances simultaneously with those entries to advance the loan dates. At the end of the quarter, she would reflect the loans as being paid off to hide the possible detection of artificial growth in SPCU’s loan portfolio. As of May 31, 2020, the drafts needed to pay off the loan balances at each quarter were more than $4.1 million not including payments and interest.
Teresa Paulo carried out a similar scheme beginning in 2011. She created a share secured loan in an account using the name and social security number of a member without their knowledge. Paulo took out more advances on the loan and took out additional loans from the account. Proceeds were then transferred into a joint account for personal spending purposes. In order to use the money for personal expenses and to transfer money to her family members, she created another share secured account using another individual’s identity. She paid off the loan and rebooked it multiple times with further advances. Exactly as Lehman did, Paulo concealed her fraud by creating false credit transactions with other employees’ usernames and passwords. Paulo’s drafts needed to pay off the loan balances at each quarter surpassed $1.2 million excluding payments and interest. She did make $7,736.16 in legitimate payments to the loan balances.
“These guilty pleas are the direct result of a diligent investigation by hardworking FBI employees and our partners at the Federal Deposit Insurance Corporation,” says Rich Bilson, Senior Supervisory Resident Agent of FBI Atlanta’s Valdosta office. “Paulo and Lehman’s greed driven scheme stole hundreds of thousands of dollars and damaged the financial security of innocent victims. They will now be held accountable for their blatant misuse of the power of their positions.”