Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

Full Bio →

Written by

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

Full Bio →

Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 28, 2012

Advertiser Disclosure

Advertiser Disclosure: We strive to help you make confident loan decisions. Comparison shopping should be easy. We are not affiliated with any one loan provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about loans. Our goal is to be an objective, third-party resource for everything loan related. We update our site regularly, and all content is reviewed by experts.

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.