Embezzlement of about $10 million – and the pursuit of “sinfulthings” – led to the downfall of the tiny Shiloh of Alexandria FCUand its manager, according to a civil complaint filed this week bythe NCUA, which is seeking to recover losses to the share insurancefund caused by the failed credit union.

The late John C. DuPree Jr., a volunteer who served as solemanager for the $2.4 million institution in Alexandria, Va., diedat the age of 48 on April 4, 2013 – just one day before the NCUAwas set to inspect the credit union's records, but he left a noteon his computer, confessing that he had stolen money for severalyears to pay for “sinful things,” said a complaint filed in theU.S. District Court for the Eastern District of Virginia.

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The NCUA, which liquidated the volunteer-run credit union inmid-April, filed a lawsuit Tuesday against DuPree's estate and hisformer fiancée, Sharon Gonder of Maryland. The couple allegedlyconcocted an elaborate certificate of deposit scheme to support alavish lifestyle.

The agency is seeking $9.7 million in compensatory damages andpunitive damages, along with an injunction to prevent thedissipation of estate assets during litigation, according to thelawsuit, which lists DuPree's mother, Mary H. DuPree, asadministrator of the estate.

During the involuntary liquidation in mid-April, the NCUA saidShiloh of Alexandria was insolvent and had no prospect forrestoring viable operations. Yet, the credit union had reported16.52% net worth, 1.08% delinquent loans and no charge offs, and areturn on average assets of 1.37%, as of Dec. 31, 2012.

Those seemingly healthy numbers prompted many people, includingNCUA officials, to question what had really been going on at thetiny co-op, according to court documents.

Following the liquidation, the NCUA investigated DuPree'sactivities and concluded that he and Gonder engaged in a series ofunlawful acts that resulted in the credit union's insolvency,liquidation, and insubstantial and continuing losses to the NCUA'sshare insurance fund, the complaint said.

DuPree and Gonder allegedly funneled much of the stolen moneyinto their jointly owned company, JD Payne Properties, and used itto support a lavish lifestyle, including buying numerous cars andreal estate, the lawsuit said.

DuPree, who worked for the Environmental Protection Agency, wasthe sole person responsible for posting transactions to the creditunion's general ledger and maintaining its financial records, andthe 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 firstmanager until his death in 2009, when the younger DuPree assumedthe role, according to the complaint.

Since Shiloh of Alexandria had a low income designation, thecredit union's low-income status allowed it to accept investmentdeposits, such as CDs, from non-member institutions, which DuPreeand Gonder used to conduct an elaborate scheme, according to courtdocuments.

Next Page: 'Overwhelming Guilt'

DuPree falsified general ledger balances by replacing convertedcredit union funds with proceeds from CDs that were purchased bynon-member (and often non-local market) participants, which he hadnot posted to Shiloh's financial records, the complaint said.

He altered records to hide his misappropriation and conversionof member funds, the lawsuit said, and he did not timely oraccurately post members' transactions to their accounts, thecomplaint said.

Even though Shiloh Credit Union did not have a cash operationand banked with an independent financial institution, DuPreewithdrew substantial amounts of cash from Shiloh's bank account tobenefit himself and Gonder, the complaint said.

The NCUA's investigation revealed that, because of DuPree'sacts, Shiloh had millions of dollars in unrecorded non-member sharedeposits, and massive discrepancies in its stated cash on handbalance and share account balances, which rendered it insolvent,the complaint said.

According to court documents, NCUA became aware March 27 of adiscrepancy between the stated amount of non-member share depositsin Shiloh's year-end financial statement and the amount of actualnon-member share deposits held.

The agency attempted to meet with DuPree on various dates toreview books and records, according to court records, and a meetingwas set for April 5, but DuPree died the day before.

Upon learning of DuPree's death, the complaint said, the NCUAlaunched a full investigation of Shiloh's books and records, anddiscovered a document on DuPree's credit union computer that statedthe following:

“By the time you read this I will have taken my life. I havebeen stealing money from Shiloh Credit Union for several years now.I have acted alone in this thievery. I betrayed the trust thateveryone 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 toeveryone to cover up my thievery. I realize that whatever goodthings we have done over the years are discredited by my actions. Ihave disgraced my family, my great father's memory, church andcommunity.

“The guilt is overwhelming and I am too big a coward to facethose that I have stolen from. I regret my actions, but it is fartoo late for forgiveness.”

Shiloh of Alexandria was once a shining star among small creditunions and often cited as a best-practices institution. Dupree'sfather was considered a pioneer of the community development creditunion movement.

In the Feb. 27, 2013, issue of Credit Union Times,NAFCU CEO Fred Becker had predicted that Shiloh of Alexandria “willbe around as long as it has the support of its church deacons, andthere is no reason to think that will change.”

Becker was among the people who expressed disbelief when Shilohwas liquidated and DuPree's death was discovered.

“We are saddened with the recent events. Shiloh has been aspecial credit union with a special place in credit union history,”he told Credit Union Times in an April 13 article.