Credit Union Times reported approximately 35 fraudcases this year and about 75% of them were committed by creditunion employees, namely CEOs, managers, loan officers andtellers.

In most of these insider fraud schemes, the money embezzledamounted to tens of thousands or hundreds of thousands of dollars.In a few of the fraud cases, however, millions of dollars werestolen, and in some cases, the theft occurred over several years ordecades.

In our new list of the Top 7 insider fraud schemes of 2013, morethan $40 million was bilked by five CEOs/managers and a loanofficer. One fraud case, however, is still under investigation. Andwhile a civil lawsuit has been filed alleging fraud loanparticipation against three former credit union employees, nocriminal charges have been filed against them.

Six out of the seven credit unions – well under $50 million inassets each – were shuttered by the NCUA. Three CEOs/managersand the loan officer are in federal prison. One CEO is in federalcustody awaiting possible indictment and trial and another creditunion manager took his own life.

Here are their stories:

Next Page: Hiding Out in Cleveland

Hiding Out in Cleveland

On the evening of July 16, the FBI and local police surroundedthe million-dollar Cleveland suburban home of Alex R. Spirikaitis to arrest the CEO on fraud charges that ledto the collapse of the $23.6 million Taupa Lithuanian CreditUnion.

For safety reasons, authorities waited until daybreak toapproach the home but found that Spirikaitis somehow managed toelude them.

For the next three months, Spirikaitis was on the run. The FBIissued a public warning, apparently for good reason, that theformer CEO could be armed, dangerous and suicidal.

After Spirikaitis was nabbed by FBI agents in October, it wasrevealed that NCUA auditors found 10,000 rounds of ammunition and multiple semi-automatic weaponsin a storage room at the credit union. It is unknown why theweapons and ammunition were stored in the credit union andSpirikaitis does not have an Ohio concealed carry permit, accordingto court records. The weapons and ammunition are being held by theCleveland Police Department.

According to court documents, about $10 million to $16 millionmay have been embezzled from the credit union, which would make itone of the largest fraud cases in credit union history.

An FBI investigation found that Spirikaitis received a December2011 bank statement that showed a total of $559,468 in Taupa'saccounts at the $4.5 billion Corporate One Federal Credit Union inColumbus, Ohio.

However, Spirikaitis reported on the credit union's December2011 NCUA Call Report $16,165,288 in assets at the corporate creditunion. Court documents also show Spirikaitis allegedly altered andmodified Corporate One FCU bank account statements forexaminers.

Now in federal custody, it appears that Spirikaitis iscooperating with prosecutors and is in pre-indictment negotiationswith them. The FBI investigation also has revealed others wereinvolved in the massive fraud case.

Former teller Michael Ruksenas pleaded guilty earlier this month inCleveland's U.S. District Court to conspiring to embezzle more than$481,000.

Federal prosecutors said they expect to charge six others in thecoming weeks or months.

Next Page: $10 Million for 'SinfulThings'

$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 suicidenote. “I've been stealing money from Shiloh Credit Union forseveral years now. I have acted alone in this thievery. I betrayedthe trust that everyone placed in me.”

At age 48, DuPree committed suicide on April 4, just one daybefore the NCUA was set to inspect the suburban Virginia creditunion's financial records. NCUA's investigation found on DuPree'soffice computer his suicide note in which he also acknowledged mostof the funds he stole – about $10 million –were used for “sinfulthings.”

About a week after Dupree's death, the NCUA liquidated thevolunteer-run credit union.

In November, the NCUA filed a lawsuit against DuPree's estateand his former fiancée, Sharon Gonder of Maryland. DuPree andGonder allegedly funneled much of the stolen money into theirjointly owned company, JD Payne Properties, and used it to supporta lavish lifestyle, including buying numerous cars and real estate,the lawsuit said.

Since Shiloh of Alexandria had a low-income designation, it wasallowed to accept investment deposits, such as CDs, from non-memberinstitutions, which DuPree and Gonder used to conduct an elaboratescheme, according to court documents.

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 accurately postmembers' transactions to their accounts.

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.

Next Page: A Piece of the Action

Breaking Bad for a Piece of the Action

Auto loans are a main source of revenue for credit unions, andone cooperative employee who broke bad decided he wanted a piece ofthe action.

Michael Ross Franco, a former loan officer for the $274 millionMy Community Federal Credit Union in Midland, Texas, wassentenced to 18 months in federal prison in November for his rolein approving nearly 500 fraudulent auto loans totaling $7 millionand accepting more than $29,000 in kickbacks, according to the U.S.Attorney's office there.

Franco worked as a loan officer with My Community FCU from May2006 until October 2008.

During that time, Franco admitted approving 487 fraudulent autoloans totaling more than $7 million. The fraudulent autoapplications overstated or misstated the customer's income, thecustomer's debt-to-income ratio and/or the customer's credit score,court records show.

Franco also admitted to accepting more than $29,000 inkickbacks from co-conspirators for his role in the scheme.

The co-conspirators, Raymond Holguin Jr., operator of MotorCity, an auto dealership in Odessa, Texas, and Gustavo Pizarro,general sales manager at Motor City, have each pleaded guilty toone count of conspiracy to commit bank fraud, according to the U.S.Attorney's office. They are scheduled to be sentence on Jan. 9.

While Franco, 41, will spend a short time in the federal pen, itcould him a long time to pay the court-ordered restitution of $4.1million to the credit union.

Next Page: Last of the Feminist-CharteredCUs

The Last Feminist-Chartered CU

The Women's Southwest Federal Credit Union in Dallas was formedwhen local activists, attending a lecture by Gloria Steinem in1973, asked the Ms. Magazine editor how they could assist in thewomen's movement.

“Start a credit union,” she said.

Women's Southwest FCU was one of several feminist credit unions that were chartered in the early 1970sto provide women with credit in an era when women could nottypically acquire a loan in their own names.

For years, the credit union was flourishing, or at least itappeared that way, until the fall of 2012 when NCUA seized the lastof the feminist-chartered credit unions.

Theresa “Teri” Portillo, former manager of the shuttered $2 million Women's Southwest FCU, pled guilty toembezzlement charges in U.S. District Court in Dallas and wassentenced to 6 and a half years in federal prison in January.

Portillo admitted to stealing $3.4 million from the Dallas-basedcredit union over a period of 11 years, from 2001 to 2012.

According to court documents, she sold 18 credit union-ownedcertificates to other institutions and pocketed the proceeds, usingthe cash to buy nine properties in the Dallas area, a Mexican timeshare in Cabo San Lucas, jewelry, vehicles, vacations, and to paybills for herself, family members and friends.

Portillo was ordered by pay $3.4 million in restitution andagreed to forfeit the properties and jewelry she illegallyobtained.

Next Page: Fraud, Drugs and $50,000 a Month

Fraud, Embezzlement andDrugs

Federal prosecutors said Ignacio Morales used his position asthe 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 healso withdrew half a million dollars from the Philadelphia creditunion in an attempt to purchase 15 kilograms of cocaine.

He admitted that he intended to use his share of the profitsfrom the drugs to cover up his crimes and throw regulators off histrail.

In January, Morales was sentenced to seven years in federalprison after pleading guilty to fraud, embezzlement, moneylaundering, filing false income tax returns and possession ofcocaine with intent to distribute.

He was ordered to pay $2.3 million in restitution to the NCUAand pay restitution to the IRS of $7.3 million.

Court records showed the former CEO also was a tax cheat whocashed hundreds of fraudulent U.S. tax refund checks through BFCU,keeping 20% of each check. Morales was earning $50,000 a month inkickbacks from just one person who cashed nearly a dozen fakechecks per week, prosecutors said.

Morales also took $600,000 from the credit union to buy $1.2million in real estate for personal use and stole $700,000 from amember who deposited $1.7 million at the credit union, courtrecords show.

According to court documents, Morales generated fake statementsand misapplied credit union funds to pay dividends on the stolenfunds to hide his crimes.

Next Page: A Simple Life, A Complex Fraud

A Simple Life, A Complex Fraud

Sharon Broadway's lawyer said her client led a simple life. Butthe fraud that the former manager perpetrated on the former UnitedCatholic Credit Union in Temperance, Mich., for 27 years wasanything but simple.

As manager, secretary, board member and sole employee of the$303,261 cooperative, Broadway, who embezzled $2.1 million since1985, was able to conceal her crimes for years using a complexmoney laundering scheme involving forged checks and multiplealiases, according to Michigan authorities.

Broadway's fraud was uncovered after a routine examination bythe Michigan Office of Financial and Insurance Regulation showedthat a substantial amount of certificates of deposit wentun-recorded in the credit union's financial records, authoritiessaid.

The 62-year-old Toledo, Ohio, woman was sentenced in January to10 to 240 months for embezzlement and 45 months to 240 months forracketeering. She also was ordered her to pay $2.5 million inrestitution to NCUA.

Following her sentencing hearing, her lawyer, Lorin Zaner, tolda local newspaper that Broadway spent some of the money onothers.

“There really is nothing to show for it,” Zaner toldToledoBlade.com. “She didn't live an extravagant life.”

Zaner didn't explain, however, what happened to the rest of allof that money over all of those years.

Next Page: Loan Participation Plot

Loan Participation Plot at Lynrocten FCU

The NCUA liquidated the $13.8 million Lynrocten FCU ofLynchburg, Va., in May, about a week after local print and broadcast media reported that local police wereinvestigating allegations from members that money was missing fromaccounts and loans were made from their accounts without theirknowledge.

“Detectives with the Criminal Investigations Division of theLynchburg Police Department are working with the Lynrocten Credit Union to identify where criminal activity hasoccurred,” the Lynchburg Police Department posted on its Facebooksite.

The NCUA said in a release it decided to liquidate the1,068-member credit union and discontinue operations afterdetermining it was insolvent and had no prospect for restoringviable operations.

Lynrocten was a three-person shop headed by Manager Linda S.Newcomb.

In November, Newcomb and former credit union employees TeresaHumphries and Becky Nichols were named as defendants in a civillawsuit filed by the $20 million Northern Piedmont Federal CreditUnion of Culpeper, Va.

The lawsuit accuses the trio of a $1.7 million loanparticipation fraud,

Northern Piedmont wired more than $3 million to Lynrocten from2009 to 2011 and entered into agreements based on fraudulentmisrepresentations, according to the civil complaint.

“Newcomb and Humphries concocted a scheme to originate loans,allegedly including the loans in which Northern Piedmont purchasedparticipations, in members' names without the members'authorization,” the complaint states.

Newcomb negotiated each agreement on behalf of Lynrocten,provided a list of borrowers' names and loan account information,and “represented to Northern Piedmont that actual loans secured byshares or vehicles would be the basis of these agreements,” thecourt documents said.

In addition to the missing $1.7 million, Northern Piedmont seeksinterest and punitive damages, according to court documents.

Humphries allegedly confessed in April and May that she andNewcomb had taken loans out in members' names and deposited thefunds in their family members' accounts for a decade.

However, Newcomb denied being involved and Humphries laterretracted the statement, according to court records.

Northern Piedmont learned from NCUA investigators that only oneloan allegedly supporting the loan participation agreements waslegitimate, according to court documents, and that loan was made toNewcomb's daughter, who has since declared bankruptcy.