Accountant, Biz Teacher Gets 5 Yrs. for $8M Fraud
A business school educator and former mortgage company executive has been sentenced to five years in prison for his role in a fraud scheme that defrauded banks of $8 million, the U.S. Attorney's Office in Minnesota announced Tuesday.
Joseph W. Traxler, 64, of Bloomington, was also ordered to pay $5.4 million in restitution. His sentence was handed down Tuesday in Minneapolis by U.S. District Court Judge David S. Doty.
Traxler used to be an accountant, senior vice president, and chief financial officer for now-defunct Centennial Mortgage and Funding, Inc.-and he taught at the Minnesota School of Business in Shakopee. According to the school, he joined the faculty in 2009; the Star Tribune reported that he chaired the school's accounting program and taught a fraud course there three times.
Traxler was charged in September and pleaded guilty in October. In his plea agreement, he admitted that in 2007 and 2008, he used funds intended for mortgage loans to cover Centennial's operating losses and to fund its payroll and other expenses.
According to the U.S. Attorney's Office, Traxler and others working with him misrepresented the status of mortgage loans to get banks to advance money to Centennial, concealed loan defaults from lenders, and hid the fact that 23 mortgage loans were double-funded.
Traxler admitted that he also engaged in check kiting-a type of deposit fraud that involves floating worthless checks between accounts in order to create the illusion of having a balance from which money can be withdrawn. The accounts show inflated balances that enable checks to be honored even when there are insufficient funds-essentially taking advantage of the time it takes a check to clear.
The Star Tribune reported that Traxler agreed not to file an appeal if he was given less than five-and-a-quarter years in prison; the government reportedly sought a term of six-and-a-half years.
The Minnesota School of Business kept Traxler on as a staff member even after charges were filed against him and he pleaded guilty last fall. But the school on Wednesday issued a statement indicating that he had been fired.
“Minnesota School of Business (MSB) today terminated accounting instructor Joseph W. Traxler following his sentencing for a crime involving fraud,” the statement said. “Mr. Traxler had no financial oversight responsibilities at MSB, and the fraud had no financial impact on MSB, its students, or programs.”
The school added that the situation was an “isolated incident at the Shakopee campus and does not reflect the caliber of other staff at the Shakopee campus or at other MSB campuses.” It is conducting an internal review of procedures and protocols in light of the situation.