Embezzlement of about $10 million – and the pursuit of “sinful things” – led to the downfall of the tiny Shiloh of Alexandria FCU and its manager, according to a civil complaint filed this week by the NCUA, which is seeking to recover losses to the share insurance fund caused by the failed credit union.
The late John C. DuPree Jr., a volunteer who served as sole manager for the $2.4 million institution in Alexandria, Va., died at the age of 48 on April 4, 2013 – just one day before the NCUA was set to inspect the credit union’s records, but he left a note on his computer, confessing that he had stolen money for several years to pay for “sinful things,” said a complaint filed in the U.S. District Court for the Eastern District of Virginia.
The NCUA, which liquidated the volunteer-run credit union in mid-April, filed a lawsuit Tuesday against DuPree’s estate and his former fiancée, Sharon Gonder of Maryland. The couple allegedly concocted an elaborate certificate of deposit scheme to support a lavish lifestyle.
The agency is seeking $9.7 million in compensatory damages and punitive damages, along with an injunction to prevent the dissipation of estate assets during litigation, according to the lawsuit, which lists DuPree’s mother, Mary H. DuPree, as administrator of the estate.
During the involuntary liquidation in mid-April, the NCUA said Shiloh of Alexandria was insolvent and had no prospect for restoring viable operations. Yet, the credit union had reported 16.52% net worth, 1.08% delinquent loans and no charge offs, and a return on average assets of 1.37%, as of Dec. 31, 2012.
Those seemingly healthy numbers prompted many people, including NCUA officials, to question what had really been going on at the tiny co-op, according to court documents.
Following the liquidation, the NCUA investigated DuPree’s activities and concluded that he and Gonder engaged in a series of unlawful acts that resulted in the credit union’s insolvency, liquidation, and insubstantial and continuing losses to the NCUA’s share insurance fund, the complaint said.
DuPree and Gonder allegedly funneled much of the stolen money into their jointly owned company, JD Payne Properties, and used it to support a lavish lifestyle, including buying numerous cars and real estate, the lawsuit said.
DuPree, who worked for the Environmental Protection Agency, was the sole person responsible for posting transactions to the credit union’s general ledger and maintaining its financial records, and the only person who knew how to disburse funds to members, originate loans and post transactions, the lawsuit said.
His father, John DuPree Sr., was the credit union’s first manager until his death in 2009, when the younger DuPree assumed the role, according to the complaint.
Since Shiloh of Alexandria had a low income designation, the credit union’s low-income status allowed it to accept investment deposits, such as CDs, from non-member institutions, which DuPree and Gonder used to conduct an elaborate scheme, according to court documents.
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DuPree falsified general ledger balances by replacing converted credit union funds with proceeds from CDs that were purchased by non-member (and often non-local market) participants, which he had not posted to Shiloh’s financial records, the complaint said.
He altered records to hide his misappropriation and conversion of member funds, the lawsuit said, and he did not timely or accurately post members’ transactions to their accounts, the complaint said.
Even though Shiloh Credit Union did not have a cash operation and banked with an independent financial institution, DuPree withdrew substantial amounts of cash from Shiloh’s bank account to benefit himself and Gonder, the complaint said.
The NCUA’s investigation revealed that, because of DuPree’s acts, Shiloh had millions of dollars in unrecorded non-member share deposits, and massive discrepancies in its stated cash on hand balance and share account balances, which rendered it insolvent, the complaint said.
According to court documents, NCUA became aware March 27 of a discrepancy between the stated amount of non-member share deposits in Shiloh’s year-end financial statement and the amount of actual non-member share deposits held.
The agency attempted to meet with DuPree on various dates to review books and records, according to court records, and a meeting was set for April 5, but DuPree died the day before.
Upon learning of DuPree’s death, the complaint said, the NCUA launched a full investigation of Shiloh’s books and records, and discovered a document on DuPree’s credit union computer that stated the following:
“By the time you read this I will have taken my life. I have been stealing money from Shiloh Credit Union for several years now. I have acted alone in this thievery. I betrayed the trust that everyone placed in me.
“Some of the funds were used to help those in need; however, most of the funds were used for sinful things. I repeatedly lied to everyone to cover up my thievery. I realize that whatever good things we have done over the years are discredited by my actions. I have disgraced my family, my great father’s memory, church and community.
“The guilt is overwhelming and I am too big a coward to face those that I have stolen from. I regret my actions, but it is far too late for forgiveness.”
Shiloh of Alexandria was once a shining star among small credit unions and often cited as a best-practices institution. Dupree’s father was considered a pioneer of the community development credit union movement.
In the Feb. 27, 2013, issue of Credit Union Times, NAFCU CEO Fred Becker had predicted that Shiloh of Alexandria “will be around as long as it has the support of its church deacons, and there is no reason to think that will change.”
Becker was among the people who expressed disbelief when Shiloh was liquidated and DuPree’s death was discovered.