Top 7 Insider Credit Union Fraud Cases of 2013
Credit Union Times reported approximately 35 fraud cases this year and about 75% of them were committed by credit union employees, namely CEOs, managers, loan officers and tellers.
In most of these insider fraud schemes, the money embezzled amounted to tens of thousands or hundreds of thousands of dollars. In a few of the fraud cases, however, millions of dollars were stolen, and in some cases, the theft occurred over several years or decades.
Hiding Out in Cleveland
On the evening of July 16, the FBI and local police surrounded the million-dollar Cleveland suburban home of Alex R. Spirikaitis to arrest the CEO on fraud charges that led to the collapse of the $23.6 million Taupa Lithuanian Credit Union.
$10 million for 'Sinful Things'
“By the time you read this I will have taken my life,” John C. DuPree Jr., volunteer manager for the $2.4 million Shiloh of Alexandria Federal Credit Union, wrote in a suicide note. “I’ve 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.”
At age 48, DuPree committed suicide on April 4, just one day before the NCUA was set to inspect the suburban Virginia credit union’s financial records. NCUA’s investigation found on DuPree’s office computer his suicide note in which he also acknowledged most of the funds he stole – about $10 million –were used for “sinful things.”
Breaking Bad for a Piece of the Action
Auto loans are a main source of revenue for credit unions, and one cooperative employee who broke bad decided he wanted a piece of the action.
Michael Ross Franco, a former loan officer for the $274 million My Community Federal Credit Union in Midland, Texas, was sentenced to 18 months in federal prison in November for his role in approving nearly 500 fraudulent auto loans totaling $7 million and accepting more than $29,000 in kickbacks, according to the U.S. Attorney’s office there.
The Last Feminist-Chartered CU
The Women’s Southwest Federal Credit Union in Dallas was formed when local activists, attending a lecture by Gloria Steinem in 1973, asked the Ms. Magazine editor how they could assist in the women’s movement.
“Start a credit union,” she said.
Federal prosecutors said Ignacio Morales used his position as the CEO of the now-shuttered $7 million Borinquen Federal Credit Union not just to embezzle more the $2.3 million through a variety of schemes for six years, but he also withdrew half a million dollars from the Philadelphia credit union in an attempt to purchase 15 kilograms of cocaine.
He admitted that he intended to use his share of the profits from the drugs to cover up his crimes and throw regulators off his trail.
A Simple Life, A Complex Fraud
Sharon Broadway’s lawyer said her client led a simple life. But the fraud that the former manager perpetrated on the former United Catholic Credit Union in Temperance, Mich., for 27 years was anything but simple.
As manager, secretary, board member and sole employee of the $303,261 cooperative, Broadway, who embezzled $2.1 million since 1985, was able to conceal her crimes for years using a complex money laundering scheme involving forged checks and multiple aliases, according to Michigan authorities.
Loan Participation Plot at Lynrocten FCU
The NCUA liquidated the $13.8 million Lynrocten FCU of Lynchburg, Va., in May, about a week after local print and broadcast media reported that local police were investigating allegations from members that money was missing from accounts and loans were made from their accounts without their knowledge.
“Detectives with the Criminal Investigations Division of the Lynchburg Police Department are working with the Lynrocten Credit Union to identify where criminal activity has occurred,” the Lynchburg Police Department posted on its Facebook site.