CLEVELAND – A hearing in the fraud trial of developer A. Eddy Zai was abruptly cancelled last week as lawyers for Zai, accused of obtaining $19 million in fraudulent loans from failed St. Paul Croatian FCU, have begun negotiating with federal prosecutors in an attempt to reach a plea deal.

The 43-year-old Zai is charged with 34 counts fraud and money laundering in one of the dozens of schemes that sunk the one-time $240 million credit union, which collapsed in 2010. He was among more than two dozen people charged in the loan scheme that cost an estimated $170 million.

Prosecutors say Zai bribed Anthony Raguz, the CEO of St. Paul Croatian, in order to obtain the real estate development loans and did not have the proper credit to qualify for the loans.

Raguz has pleaded guilty to approving loans to Zai and hundreds of members he knew they did not have the means or the intent to repay. Among them were Koljo Nikolovski, a Balkans crime figure who was convicted earlier this year of obtaining more than $6 million in loans and siphoning the money to banks in Croatia and Albania.

Sentencing for Raguz has been delayed until after he testifies against Nikolovski and Zai and others of the borrowers.

Zai’s lawyers met last week behind closed doors in the chambers of U.S. District Judge John Adams, but failed to reach an agreement. Later, in open court, Adams described the discussions as complicated, involving complex criminal issues interrelated with a civil lawsuit pending against Zai.

A civil suit brought by NCUA against Zai has been put on hold until the criminal charges are resolved. NCUA has also filed suit against two dozen other St. Paul Croatian borrowers in attempt to recoup losses on the big failure.

Zai, was scheduled to stand trial on 34 charges on Nov. 5, but Judge Adams cancelled the trial. Instead, the lawyers will meet again on that date and try to resolve the hurdles to a plea deal, Adams said.

NCUA sued the well-known developer in May for recovery of funds Zai borrowed from the credit union – allegedly using kickbacks and bribes paid to the credit union’s CEO Anthony Raguz. NCUA claims the Cleveland developer and his companies opened share accounts at the Eastlake credit union, then used the accounts to secure development loans to benefit of nine companies led by Zai, and then failed to repay the bulk of the loans.

 

Subscribe Now

Authoritative analysis and perspective for every segment of the credit union industry

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.