NEW YORK – Lindsay Lohan's (search) uncle is helping make trouble a relative term.
Paul Sullivan, the 47-year-old brother of the young actress' mom, was busted at his Long Island, N.Y. home Tuesday morning for alleged mail fraud — involving funds earmarked for 9/11 disaster relief.
Sullivan — who has publicly blasted Lohan's disgraced dad in the past for abusive behavior toward the family — essentially siphoned off nearly $132,000 in checks slated to go to creditors, charged inspectors for the U.S. Postal Service and Small Business Administration.
The federal officials said his slick scheme unfolded like this:
Sullivan, in seeking 9/11 relief loans, claimed to be "the exclusive agent for Hyundai Motor Company to the United Nations," as well as the overseer of Ropa Wines, a purported exporter of New York and California vintages to Asia.
He told the government that after 9/11, his car business with the United Nations faltered. That prompted him to request a $1.5 million, low-interest loan from a government fund established to aid firms ailing financially from the fallout of the terror attacks.
He wound up receiving a nearly $650,000 loan.
But investigators said that instead of using the money to pay back two creditors as he said he would, he swindled them.
The creditors alleged that he forged checks destined for them and deposited the money in his own business account.
The creditors were SDV USA Inc., which according to the complaint provided consulting advice to Sullivan on shipping international freight, and Croatian businessman Nenad Nenac, who was a liaison for Sullivan's biz with the United Nations in Eastern Europe.
Sullivan, with his wife standing nearby, was released on $250,000 bond in federal court in Central Islip, N.Y. Tuesday.
But the judge took his passport and ordered him to remain in the New York area.
Reached at his modest ranch home in Old Bethpage, N.Y. later, Sullivan said, "No comment," before slamming the door.
His legal woes are only the latest to hit the family of the sexy, freckled Lohan.
Michael Lohan (search) was sentenced to four years in jail last month for drunken driving, contempt of court and assaulting another brother-in-law.