The estate for U.S. Mortgage Corp. and its CU National Mortgage subsidiary paid 26 credit unions and Fannie Mae an initial distribution of $8 million last week, repayment for losses accrued in the $140 million fraud engineered by company founder Michael McGrath, with additional payments expected.
“Checks went out last week,” Erin Kennedy, a New Jersey attorney representing the estate, told the Credit Union Journal Monday. The initial payment amounts to 14.8% of claims, she added.
Several other repayment possibilities remain in the restitution and liquidation process, including the pay out of millions for a recent settlement with CU National’s auditing firm, J.H. Cohn LLP, and ongoing litigation with Fannie Mae, according to Kennedy.
McGrath was convicted in 2010 of selling $140 million worth of mortgages he was supposed to be servicing for 28 credit unions to Fannie Mae and using the proceeds to keep his company afloat, gambling away the vast majority of the money in the stock market. He was sentenced in 2011 to 14 years in federal prison.
Last week’s payment came from the $15 million of assets forfeited by McGrath as part of his guilty plea, according to Kennedy.
The latest payment comes after most credit union victims of the massive fraud have settled claims with both Fannie Mae and with CUMIS Insurance Society which has resulted in recoveries averaging more than 90% of the original losses.
Among the credit union victims of the huge fraud were: Picatinny FCU, Sperry Associates FCU, Suffolk FCU, Treasury FCU, TCT FCU, Proponent FCU, Educational Systems FCU, British Airways Employees FCU, ADP FCU, Delaware First FCU, First Florida CU, Jersey Trades Financial CU, JM Associates FCU, Lassen County FCU, Miami Firefighters FCU, Novartis FCU, Penn East FCU, Pinnacle FCU, Rutgers FCU and Piedmont Advantage CU.
