Jungen, 66, former CEO of Central States, was charged with three counts of fraud, as were his ex-wife and former company president, Elaine Jaeger, 68, and former chief financial officer Jerome Poehnelt, 63. David Chapman, 57, a CPA and an investor in an investment pool, was charged with three counts of fraud and two additional counts of lying to the FBI and obstruction.
Central States, which provided mortgage services for more than 250 Midwestern credit unions, filed for bankruptcy in 2009 amid the mortgage crash, causing as much as $75 million in losses for its credit union investors.
Among the owners were: Enterprise CU, Focus CU, Guardian CU, Landmark CU, Glacier Hills CU, Sherwin Williams Employees CU, Northwestern Mutual CU, Aurora Healthcare CU, Allco CU, Superior Choice CU, Ladish Community CU and Prime Financial CU.
Jungen was the face of Central States, serving as its CEO from 1994 until he was fired in 2008. He had a high profile in both the Milwaukee business community and the mortgage industry, having been a director at the Wisconsin Mortgage Bankers Association. Jungen founded Central States in 1984 and sold a majority stake in 1997 to a group of 25 credit unions and the Wisconsin CU League, while continuing to run the company—which wrote about $3 billion in mortgages during its final three years of operation.
The failure of Central States caused havoc in the community, prompting at least one car dealer to file for bankruptcy, contributing to the failure of Members United Corporate FCU, which had a warehouse line of credit union with the mortgage company, and pushing several credit unions to the brink.
Jungen, Jaeger and Poehnelt were fired from the company in 2008 a few months before Central States filed a $15 million racketeering lawsuit against them and others. The suit eventually was dropped in the wake of a receivership.
According to the indictment, Jungen and the others ran an investment pool that was filled with Central States’ subprime mortgages. The four used Central States to guarantee their investment in the pool and received regular dividends from the pool, the indictment says, noting the scheme began in 2001. The dividends were paid even if the mortgages were not performing.
The company's board of directors was not aware of the arrangement, the indictment said.