William J. Memmer, a former assistant manager and treasurer at the failed G.I.C. Federal Credit Union in the Cleveland suburb of Euclid, Ohio, was charged Monday with embezzling almost $2 million and falsifying records, according to the U.S. Attorney’s Office.
The NCUA liquidated the 3,476-member, $15.5 million cooperative on Dec. 13, 2012 after declaring it to be insolvent.
According to a material loss review released Dec. 2, 2013 by the NCUA's Office of Inspector General, the credit union’s failure was caused by fraud and resulted in an estimated loss of $7 million to the share insurance fund.
Memmer, 63, a resident of Lakewood, Ohio, is accused of using blank G.I.C. FCU checks to pay off $1,843,007 in debt on 15 personal credit card accounts and falsifying the credit union’s quarterly financial reports to hide the theft, beginning as early as 2003. He also allegedly falsified confirmations of GIC assets by as much as $5.7 million, according to court documents.
“Memmer took advantage of his high-level position of trust by falsifying records and funneling money,” said Stephen Anthony, special agent in charge of the FBI’s Cleveland office. “The FBI will continue efforts to see that fraudsters like Memmer are brought to justice.”
Memmer is charged with one count of embezzlement and one count of making false entries. He was charged in a criminal information, which is often filed when a suspect cooperates with prosecutors and intends to plead guilty.
“When those who hold trusted positions in financial institutions and those they work with betray the trust of the depositors, as is alleged in this matter, federal law enforcement will take all appropriate 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 to prevent G.I.C.’s failure.
The report suggested the agency should go to Congress, if needed, to get additional authority to access credit union audit papers.
According to the report, several factors allowed the fraud to go undetected, including:
- senior management displayed “questionable” integrity such as overstating assets by $8.1 million
- supervisory committee failed to complete audits for three consecutive fiscal years
- board of directors exhibited lack of supervision and failed to exercise responsibilities
To prevent similar issues in the future, the OIG recommended that the NCUA “reinforce documentation, communication, and follow up procedures required for incomplete or otherwise unacceptable external auditor reports to ensure appropriate visibility for follow up and escalation of administrative remedies if the issues are not resolved.”
NCUA management responded that corrective action had already been taken through the implementation of Chapter 5 of the National Supervision Policy Manual dealing with audits, recordkeeping and fraud, according to the OIG report.
The OIG reiterated that the policies should be reinforced, and it recommended requiring examiners to get audit reports directly from independent auditors rather than through credit union management.
NCUA management responded that it “does not believe the auditor has a legal obligation to share their audit report with NCUA as a condition of share insurance, and therefore cannot compel the auditor to provide NCUA with a copy of the report directly,” according to the report.
The OIG approved of management’s suggestion of consulting with the agency’s Office of General Counsel on the matter. It also suggested that if obtaining the report directly is not within the agency’s legal authority, it should seek to change the situation through NCUA Board action or by asking Congress to alter the Federal Credit Union Act.
G.I.C. FCU was chartered in 1936 to serve employees of Gould Inc. and evolved into a multiple common bond credit union serving several 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 one year of community control and ordered to pay a $500 fine after pleading guilty to charges of drug trafficking and possessing criminal tools.