NJ mortgage exec pleads guilty in $140 million fraud (Reuters)

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Reuters - The former president of U.S. Mortgage Corp, a New Jersey mortgage lender and broker that filed for bankruptcy in February, has pleaded guilty to two criminal conspiracy charges in a $139.6 million scheme to defraud credit unions and others, prosecutors said.

Michael McGrath, 46, pleaded guilty in federal court in Newark, New Jersey, to one count of mail and wire fraud conspiracy and one count of money laundering conspiracy, according to Ralph Marra, the acting U.S. Attorney for the District of New Jersey.

McGrath is expected to be sentenced under a plea deal to between 12-1/2 and 20 years, and to pay restitution to victims. U.S. District Judge Katharine Hayden scheduled an October 1 sentencing hearing. She allowed McGrath's release on a $1 million bond to home confinement.

McGrath admitted to conspiring with others from January 2004 to January 2009 to fraudulently sell credit union loans, and use proceeds to finance U.S. Mortgage's operations and investments for himself and the Pine Brook, New Jersey-based company, prosecutors said.

He also admitted to diverting funds that should have been paid to credit unions for mortgage loans that were to be sold to Fannie Mae, to help offset bad investments that he had made in mortgage-backed securities, prosecutors said.

John Vazquez, a lawyer for McGrath, said in a statement his client "extends his deepest sympathy" to the victims and will continue to work with authorities.

U.S. Mortgage filed for bankruptcy protection on February 23. Its petition shows creditors with more than $200 million of unsecured claims, including $99.2 million by Fannie Mae and the rest by 19 credit unions.

The case is U.S. v. McGrath, U.S. District Court, District of New Jersey (Newark).

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