Credit union fraud trial postponed again

Tuesday, September 25, 2007

By Russ Mitchell

Daily Reporter Staff

A workplace credit union embezzlement case has been postponed for the third time this year as the attorneys weigh outcomes ranging from federal charges to a plea agreement.

Linda Lee Zech, 52, Spencer, was set to stand trial at 9:30 a.m. today at the Clay County Courthouse in Spencer but was delayed at the request of the attorneys involved. Her new trial date is 9:30 a.m. Tuesday, Dec. 4.

That could change again following a pretrial conference at 9:30 a.m. Thursday, Nov. 1.

Zech was charged in January with ongoing criminal conduct, a Class B felony, for her acts to "misappropriate funds belonging to another for financial gain on a continuing basis." She is also charged with first-degree theft for "taking possession or control of property of another with the intent to deprive the other thereof," according to court records.

Specifically, she is accused of misappropriating a significant amount of cash -- starting in 2003 and ending at the start of 2007-- from the Eaton Credit Union, an employee financial institution housed at the Eaton Corporation's manufacturing facility in Spencer's industrial park.

She was released on an unsecured signature bond and entered a plea of not guilty on Jan. 23. She waived her right to a speedy trial two weeks later. Zech could face up to 10 years in prison on the first-degree theft charge. The ongoing criminal conduct charge could carry a 25-year sentence.

"Linda Zech has cooperated since this investigation and she's been interviewed by law enforcement and has admitted in committing this misappropriation and has admitted that it could be as high as $850,000," Clay County Attorney Michael Houchins said. "So I doubt this thing will go to trial. I imagine there's going to be a plea, but again, we're just in the process of going through records."

While attorneys navigate the legal ramifications, accountants continue to follow the money trail. Houchins said representatives from Eaton Corporation and the bonding company -- which is in place to protect the deposits of credit union members -- have hired private accountants to do an investigation.

"It's a real complicated financial situation -- just lots and lots of records that the accountants and examiners are going through -- trying to reconstruct how this was accomplished," Houchins said. "Essentially it looks like now there are three different ways in which she would be able to embezzle funds from them. Now we're going through each of those three ways, trying to construct documents to trace proceeds so the money can be recovered for the credit union."

Houchins suspects Zech would make out fraudulent loans to fictitious people then keep the loan money.

"Then obviously she would say it was being paid and it was not being paid," he said. "Another way, is that she was writing off loans that should not have been written off and the third way was: She was just taking cash from the accounts. People would come in with deposits and rather than putting them in the bank account, she would keep it."

The credit union is in the process of taking action to recover property, including vehicles, which may have been purchased with the credit union funds.

"As far as actually knowing where all the money went -- no we don't (know)," Houchins said. "That's been one of the mysteries."

When asked if Zech has any addictions, such as gambling, shopping or substance abuse Houchins said: "Not that we could find."

The investigation suggests that Zech handled finances at home, making it possible that others in the household would be unaware of the overall financial situation. Some of the money may have been sent to help relatives, some may have been spent on trips, according to the county attorney.

"We've subpoenaed a number of bank records and we've got four or five banker's boxes full of credit card records, cell phone records, all sorts of documents to try to determine that there are things out there that we can seize in order to help make some restitution to the Eaton Credit Union," Houchins said.

County authorities may not be the only ones interested in the documentation, Houchins confirmed Monday.

"We have been contacted by the U.S. Attorney's Office," he said. "They have requested information from us. We have forwarded that information to the U.S. Attorney's Office. They'll review it and make a decision. I've sat down with Sean Berry at the U.S. Attorney's Office several times and discussed the case. So they're looking at it. Frankly, one of the reasons that we're cooperating with the federal authorities is because of the federal sentencing guidelines, which may provide what we think would be an appropriate sentence."

Tuesday's district court date was postponed after a Sept. 17 conference with defense attorney Pamela Wingert of Spirit Lake, Houchins and the presiding judge.

Her trial was originally set for May 15, then reset for July 24, prior to Tuesday's postponed court date.

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