Car Loan Scammer Gets Caught
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UPDATED: Sep 28, 2012
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Lydia Cladek, a 67-year-old woman from St. Augustine, Fla., was sentenced on Aug 21 to 30 years and four months in a federal prison for conspiracy to commit mail and wire fraud, according to First Coast News. Additionally, Cladek must pay $34 million in restitution for her crimes.
U.S. Attorney Robert O’Neill said that the testimony and evidence presented during the trial showed Cladek offered investors the opportunity to loan money to her company in exchange for promissory notes. These notes were car loan notes secured by her company which she had previously purchased prior to attracting investors according to a Justice Department press release.
A car loan promissory note is a binding legal agreement whereby one party agrees to pay another by using the proceeds from a car loan. Investors who loan money in exchange for promissory notes typically received a fixed return on their investment, usually their principal plus annual interest.
After issuing these promissory notes, Cladek promised investors that their money would purchase a high-interest note that guaranteed a 15 to 20 percent return on investment. These promissory notes were presented as genuine but in fact they would be resold as many as five times to different investors who were unaware of the deception. In certain cases, the same note was given to multiple investors within the same week.
The scam had been in operation for years. In fact, as early as 2003, Cladek and her scam corporation began running out of car loan notes to distribute to victim investors. Only two years later in 2005, Cladek had roughly $58 million in outstanding investor notes but only $38 million in collateralizing car loan notes.
Once the FBI issued a search warrant for her company in March of 2010, the value of her car loan notes had plummeted to under $4 million versus the $90 million in investor loans.
Cladek used investors’ money to pay interest on old investors’ money in addition to funding her lavish lifestyle. The investigation discovered that she owned three vacation homes, a luxurious result of her life of crime.