Michael J. McGrath Jr. of Montclair, N.J. has been sentenced to 14 years in prison for his role in orchestrating the $136 million fraud scheme that bankrupted Pine Brook, N.J.-based U.S. Mortgage Corp. and its subsidiary, CU National Mortgage LLC, United States Attorney Paul J. Fishman announced. McGrath Jr. is the former president and controlling shareholder of closely-held U.S. Mortgage, previously pleaded guilty before U.S. District Judge Katharine S. Hayden to one count of mail and wire fraud conspiracy and one count of money laundering. According to documents filed in this and related cases and statements made in court: Beginning as early as 2002 to Jan. 27, 2009, McGrath conspired to fraudulently sell Fannie Mae hundreds of loans belonging to various credit unions. Other members of the conspiracy included U.S. Mortgage's chief financial officer and its servicing manager, Leroy Hayden. McGrath directed Leroy Hayden, who provided numerous reports to credit unions falsely stating that loans that had been sold were still in the credit unions' portfolios, to falsify records to conceal the fraudulent sales. Hayden pleaded guilty before Judge Hayden to one count of wire fraud conspiracy. McGrath admitted that he devised the scheme to prop up U.S. Mortgage, and that he used the proceeds to fund U.S. Mortgage's operations, his personal investments, and investments he made on U.S. Mortgage's behalf. The pace of the fraudulent sales increased during 2008 and early 2009. On Jan. 27, 2009, dozens of law enforcement agents executed a search warrant at U.S. Mortgage and CU National's Pine Brook, N.J. headquarters. In the following weeks, U.S. Mortgage and CU National commenced bankruptcy proceedings. Hundreds of U.S. Mortgage employees lost their jobs as a result. In addition to the 14-year prison term, Judge Hayden sentenced McGrath to three years of supervised release. McGrath also consented to forfeiture of the proceeds of his crimes and $14 million of his assets that the government has seized or frozen. The Court postponed entry of a restitution order so that the victims' losses could be properly allocated. The total loss amount, previously estimated at around $139 million, has been calculated as being somewhat less. The restitution order is expected to require McGrath to pay more than $136 million in restitution to his victims. For more information, visit http://newark.fbi.gov.