Former Minnesota Credit Union CEO Pleads Guilty in $10M Fraud Case
Inside Subprime: April 10, 2019
By Lindsay Frankel
A former Minnesota credit union CEO pleaded guilty Wednesday to felony credit union fraud after an FBI investigation that went on for five years. She allegedly embezzled more than $10 million, leading to the credit union’s closure.
The former credit union executive confessed to a decades-long embezzlement scheme in writing in 2014, though the forensic auditor was only able to confirm transactions that occurred between 2011 and 2014, since the executive allegedly wiped out backup information from the data processing system for years prior. But member statements and evidence of fake accounts confirm more than $1 million in fake loans as of 2000, which implies fraudulent activities began long before that, according to the National Credit Union Administration.
The FBI investigation began in 2014 just a few weeks before the credit union was shut down by the Minnesota Department of Commerce. Before its closure, the credit union had 3,400 members and about $51 million in assets.
In 2017, the NCUA filed a lawsuit against the executive for $2.8 million. The CEO denied accusations of “civil theft, fraud and misrepresentation, unjust enrichment, conversion and failing to perform her fiduciary duty” despite her written confession.
The executive allegedly deposited funds from the credit union into her personal account and accounts belonging to her family and friends, according to court documents. She is also alleged to have utilized member accounts to create phony loans and steal the money to assist with her fraudulent scheme. She used the money from the loans to hide fake deposits into member accounts, buy credit union checks, and remove cash from the credit union.
Court documents also show that the executive used funds from the phony loans to make payments on delinquent loans and pay off the loans of members she had personal relationships with. Federal prosecutors also say the CEO withdrew cash from the credit union’s vault account when she was not authorized to do so.
Under the plea agreement, the executive waived her right to file pre-trial motions. She faces a sentence of up to 30 years in prison with 5 years of supervised release. She will also pay up to a $1 million fine or double the gross gain or loss that resulted from her crimes, whichever is more. The court will also determine the amount of restitution the CEO will be required to pay. Her next hearing has not yet been scheduled.
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