MILWAUKEE, Wis.—Richard Jungen, the founder of Central States Mortgage, which was approximately 80% owned by credit unions in this state before it shut down, has been sentenced to one year and one day in jail for what one prosecutor said was “enriching himself and his friends at the expense of the credit unions who placed their trust in him.”
Jungen, 67, was fired in 2008 just months before the company went out of business. The Milwaukee Journal-Sentinel reported that the company’s failure caused significant losses to 17 individual credit unions. Jungen’s actual conviction was for obstructing an FBI investigation.
Jungen pleaded guilty to that charge in 2014 after he admitted to directing a colleague to backdate a letter, an action that prosecutors say caused the FBI to waste hundreds of hours of investigation, according to the Journal-Sentinel. Charges of fraud and embezzlement were dropped.
As the Journal-Sentinel reported, the letter was backdated because Jungen, who expected he would soon be fired, wanted to liquidate a $9.2 million private Central States investment fund that included himself, his then-wife and others as investors. The backdated letter made it appear that the company's board received a 90-day notice of liquidation.
"Insiders pulled $9 million out of the sinking ship," Judge U.S. District Judge Lynn Adelman said during court proceedings. The action resulted in "leaving credit unions to bail the water."
Four insiders collected nearly $3.2 million when the pool was liquidated, with the remainder going to other investors, according to prosecutors. Investors Jerome Poehnelt, Central States' former chief financial officer, and David Chapman, who authorities say backdated the letter, are still facing federal charges, according to the Journal-Sentinel.
Jungen and Elaine Jaeger, his ex-wife, each collected more than $444,000, according to court records.
Adelman ordered Jungen to pay restitution of $175,000, the sum agreed to in the plea deal.
Jungen will be eligible for release after about 10 months.