By Paritosh Bansal

NEW YORK (Reuters) - A former Doral Financial Corp (DRL.N: Quote, Profile, Research) treasurer, who was a member of the family that founded the Puerto Rican lender, was indicted on Thursday for allegedly scheming to defraud investors, U.S. prosecutors said.

Mario Levis, 44, corrupted the process by which Doral determined the publicly reported value of "interest-only strips" by undermining the independence of outside valuations, the U.S. Attorney's Office in Manhattan alleged.

An interest-only strip is created when a mortgage is split between its interest and principal components.

The scheme, which occurred between 2001 and 2005, helped to artificially inflate the company's stock price, prosecutors said. By the beginning of 2005, Doral had announced a streak of 28 quarters of record earnings based in significant part on the stated value of those assets, they said.

An aggregate decline in shareholder value of about $4 billion followed the unraveling of the scheme, they said.

A spokesman for the Levis family, Mario Jove, said the former treasurer was still one of the company's largest individual shareholders and had "never sold a single share" of his Doral stock, even though he lost most of his savings as shares declined.

"Mario Levis, while astonished by these accusations, adamantly denies the allegations and will conclusively refute them at a trial," Jove said in an e-mailed statement.

As of March 1, 2005, Levis owned about 2.4 percent of Doral stock, according to prosecutors.