William J. Memmer, a former assistant manager and treasurer atthe failed G.I.C. Federal Credit Union in the Cleveland suburb ofEuclid, Ohio, was charged Monday with embezzling almost $2 millionand falsifying records, according to the U.S. Attorney'sOffice.

The NCUA liquidated the 3,476-member, $15.5 million cooperative onDec. 13, 2012 after declaring it to be insolvent.

According to a material loss review released Dec. 2, 2013 by the NCUA's Officeof Inspector General, the credit union's failure was caused byfraud and resulted in an estimated loss of $7 million to the shareinsurance fund.

Memmer, 63, a resident of Lakewood, Ohio, is accused of usingblank G.I.C. FCU checks to pay off $1,843,007 in debt on 15personal credit card accounts and falsifying the credit union'squarterly financial reports to hide the theft, beginning as earlyas 2003. He also allegedly falsified confirmations of GIC assets byas much as $5.7 million, according to court documents.

“Memmer took advantage of his high-level position of trust byfalsifying records and funneling money,” said Stephen Anthony,special agent in charge of the FBI's Cleveland office. “The FBIwill continue efforts to see that fraudsters like Memmer arebrought to justice.”

Memmer is charged with one count of embezzlement and one countof making false entries. He was charged in a criminal information,which is often filed when a suspect cooperates with prosecutors andintends to plead guilty.

“When those who hold trusted positions in financial institutionsand those they work with betray the trust of the depositors, as isalleged in this matter, federal law enforcement will take allappropriate action to hold them accountable,” said Steven M.Dettelbach, U.S. Attorney for the Northern District of Ohio.

According to the OIG report, the NCUA could have done more toprevent G.I.C.'s failure.

The report suggested the agency should go to Congress, ifneeded, to get additional authority to access credit union auditpapers.

According to the report, several factors allowed the fraud to goundetected, including:

• senior management displayed “questionable” integrity such asoverstating assets by $8.1 million
• supervisory committee failed to complete audits for threeconsecutive fiscal years
• board of directors exhibited lack of supervision and failed toexercise responsibilities

To prevent similar issues in the future, the OIG recommendedthat the NCUA “reinforce documentation, communication, and followup procedures required for incomplete or otherwise unacceptableexternal auditor reports to ensure appropriate visibility forfollow up and escalation of administrative remedies if the issuesare not resolved.”

NCUA management responded that corrective action hadalready been taken through the implementation of Chapter 5 of theNational Supervision Policy Manual dealing with audits,recordkeeping and fraud, according to the OIG report.

The OIG reiterated that the policies should be reinforced, andit recommended requiring examiners to get audit reports directlyfrom independent auditors rather than through credit unionmanagement.

NCUA management responded that it “does not believe the auditorhas a legal obligation to share their audit report with NCUA as acondition of share insurance, and therefore cannot compel theauditor to provide NCUA with a copy of the report directly,”according to the report.

The OIG approved of management's suggestion of consulting withthe agency's Office of General Counsel on the matter. It alsosuggested that if obtaining the report directly is not within theagency's legal authority, it should seek to change the situationthrough NCUA Board action or by asking Congress to alter theFederal Credit Union Act.

G.I.C. FCU was chartered in 1936 to serve employees of GouldInc. and evolved into a multiple common bond credit union servingseveral select groups, the NCUA said.

In what seems to be an unconnected case, another former G.I.C.employee, member services representative Keiona Rutledge, was sentenced in 2008 to oneyear of community control and ordered to pay a $500 fine afterpleading guilty to charges of drug trafficking and possessingcriminal tools.