A Federal Grand Jury in Cleveland has issued a 37 count indictment against EB-5 Visa Regional Center owner A. Eddy Zai and two others. Zai, 90% owner of the Cleveland International Fund (CIF), is being charged with fraud, bribery, money laundering, conspiracy and making false statements which led to what United States Attorney Steven Dettelbach called "A conspiracy that resulted in one of the largest credit union collapses in history"
Federal Bureau of Investigation (FBI) Special Agent Stephen D. Anthony said that "This indictment is the result of a lengthy joint investigation between the FBI and the IRS. Zai was the single largest recipient of fraudulent loans and significantly contributed to one of the largest collapses of a credit union in U.S. history.?
The charges against Zai are: two counts conspiracy, two counts of bank fraud, one count of bank bribery, 11 counts of money laundering, 17 counts of making false statements to a bank, one count of making false statements to federal agents.
Darryl William, Special Agent in Charge of IRS Criminal Investigations said "Money laundering is a very complex crime involving an enormous amount of financial transactions, and IRS-CI has the investigators and expertise that is critical to locating the money and prosecuting the offenders."
It is claimed that Zai conspired with others, including Anthony Raguz, the former Chief Operating Officer of the St. Paul Croatian Federal Credit Union (SPCFCU), to submit false loan documents to the credit union, defraud the credit union of approximately $16.7 million, and pay bribes and kickbacks to Raguz for using his position at the credit union to approve numerous loans to Zai and the entities and nominee companies he controlled, according to the indictment. The conduct took place between December 2003 through March 2010, according to the indictment.
SPCFCU was placed into conservatorship by the National Credit Union Administration on April 23, 2010. One week later, the NCUA liquidated SPFCFU and discontinued its operations after determining the credit union was insolvent. At that time, SPCFCU served about 5,400 members and was believed to have assets of approximately $239 million.
At all times herein, Zai owned, operated and controlled, either solely or with Vannelli, The Cleveland Group, LLC (aka the Cleveland Group of Companies) and its many related entities, which included: Cleveland Flooring & Designs, Ltd.; Alpina, Inc.; Cleveland Development Group, LLC; The Cleveland Group, Environmental, LLC; Cleveland Real Estate Group, Inc.; The Cleveland Group Real Estate Division; The Cleveland Group, Excavating Division; Cleveland Management Group, Inc.; The Cleveland Group, Construction Division; The Cleveland Group, Consulting Division; The Cleveland Group, Ltd.; 417, Ltd.; 417 Limited; and Sutton Park, Ltd. Certain of these entities were created primarily to "operate as a safe haven" for credit union proceeds, while others performed little or no legitimate business despite having loan proceeds intended for Zai?s ?business? ventures, according to the indictment.
Zai also engaged in a scheme to defraud the credit union by, among other things, submitting loan documents for and receiving loan proceeds on behalf of companies that ceased operations, according to the indictment. Zai continued to seek and obtain loan proceeds in the name of non-operating entities even after he directed that no loan payments be made to the credit union. This scheme to defraud the credit union resulted in an approximately $13.7 million loss, according to the indictment.
The indictment alleges further that Zai submitted numerous false loan documents to the credit union between March 2008 and July 2009 in order to influence the credit union?s decision to approve loans to the companies he controlled.
Zai and his former business partner, Ted M. Vannelli, gave Raguz numerous cash payments, usually in the form of $100 bills concealed in envelopes and hand-delivered to Raguz at the credit union?s offices, and totaling more than approximately $5,000, according to the indictment. The payments were made to both induce Raguz to approve additional fraudulent loan applications and to reward Raguz for having previously approved false loan applications, according to the indictment.
Vannelli is Zai?s father-in-law, according to court documents.
The indictment also charges Zai with 11 counts of engaging in financial transactions with fraudulently obtained loan proceeds, including a series of wire transfers, all in the amount of $475,000, from an account in the name of The Cleveland Development Group, LLC to an account in the name of The Cleveland Group Real Estate Division. Both entities had ceased operations prior to these transactions.
The indictment also charges Zai and Vannelli with conspiring to submit false loan applications to Park View Federal Savings Bank and to defraud Park View Federal Savings Bank. Specifically, the indictment alleges that Zai and Vannelli submitted false loan documents, including false personal financial statements, that overstated their net worth and failed to disclose their debt to the credit union. Park View Federal Savings Bank suffered a loss of more than approximately $750,000, according to the indictment.
The indictment also charges Zai with making false statements in loan applications to ABN Amro and CitiBank in connection with a residential mortgage and home equity line of credit by, among other things, failing to disclose his debt to the credit union.
Additionally, the indictment alleges that Zai made false statements to agents with the Federal Bureau of Investigation and Internal Revenue Service when he denied: (a) knowing that one of his investors, the Zlato Group, was co-owned by Raguz, and (b) speaking with Raguz about money Zai?s company received from the Zlato Group.
Finally, the indictment alleges that Zrino Jukic, a co-owner of the Zlato Group, engaged in a scheme and artifice to defraud St. Paul Croatian Federal Credit Union by providing false information in connection with approximately 11 loan applications, the proceeds of which were used to allow Jukic and Raguz, through their company, the Zlato Group, to invest in certain of Zai?s business ventures.
This case is being prosecuted by Assistant U.S. Attorneys Bridget M. Brennan and John D. Sammon, following an investigation by the Cleveland office of the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation Division.