Insurance Company Sues Credit Union Over $5.4 Million Claimant | Credit Union Times

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Southwest Marine and General Insurance Company is suing Southern Pine Credit Union, alleging that some of its claims in the past were fraudulent in terms of credit protection.

Valdosta, Ga. credit union. he has denied this, according to his court documents.

In June, a $42.4 million Southern Pine company sued a Morristown, NJ insurance company for refusing to provide a $5,471,518 guaranteed loss for a fraudulent loan allegedly committed by President/CEO Leah Lehman. and former President Teresa Paulo.

Losses reported from Paul’s loans totaled $1,233,201 and reported losses related to Lehman loans totaled $4,238,317.

In 2020, Southern Pine lost $5,844,935, but returned to profitability in 2021 through 2022, according to NCUA financial reports.

The credit union is suing Southwest Marine for $3,746,000. The insurance company’s lawsuit is asking U.S. District Court Judge W. Louis Sands in Valdosta, Ga., to stop the credit union’s foreclosure action.

Lehman and Paul allegedly committed loan fraud in 2003 and 2006, respectively.

In 2014, Southwest Marine offered Southern Pine a three-year employee loyalty and director fraud guarantee of up to $2.5 million. The insurance had been renewed twice.

The credit union said in its original insurance filings and re-applications that it had severance practices among its employees. But Southwest Marine says that based on information and documents provided by the credit union, nearly all of the separations were done by Lehman and Paul. But according to court documents, the credit union has denied that much of the separation was done by Lehman and Paul.

The credit bureau also said in documents provided to the insurance company that it had reviewed credit files and that its supervisory committee had reviewed loans to executives, employees, and their family members and reviewed activity on employee accounts.

In response to Southwest Marine’s claims, Southern Pine said the management reports did not mention concerns about undetected and undetected theft. Court records also indicated that the credit union was subject to inspections by state regulators and the NCUA.

However, it appears that many red flags were missed even by the oversight committee, state and federal examinations, and other financial oversight that the credit union and its executives said they did.

Based on a forensic investigation by Lillie & Company, a Sunbury, Ohio-based CPA firm that specializes in internal fraud investigations, Southern Pine says the fraud began in June 2003 when Lehman created a credit account in her husband’s name. $7,850 and she allegedly transferred the money into a joint account she had with her husband.

According to Lillie’s investigation, over the next 17 years, Lehman continued to use these joint accounts, her husband’s accounts and the accounts of other family members to take out fraudulent loans and use the money for personal purposes and to cover up her theft.

Paulo says he began transferring money to family members’ accounts “for short-term use” in 2006. A year later, he set up a so-called secured loan account and made payments on credit cards and other expenses, according to Lillie’s investigation. .

Paul’s deception grew very quickly.

For example, as of July 1, 2014, he allegedly made about $42,000 in fraudulent loans, and by January 1, 2015, that amount had grown to about $103,000. However, in one consecutive year, the amount increased to approximately $270,000, $529,000, $750,000, $945,000, and $1,170,000, according to Lillie’s research.

Sometime in the first or second quarter of 2020, through sources outside of Southern Pine, NCUA became aware of suspicious activity involving Lehman and Paul. At the time, the credit union had five employees who were insured with the Southwest Marine policy.

As of June 11, 2020, Lehman and Paul were fired and the credit union was placed into receivership. Southern Pine, which serves more than 1,400 members, was released in March 2022.