A former Alabama credit union president/CEO was found guilty of 98 felony counts of bank fraud, money laundering, wire fraud and conspiracy by a federal jury in U.S. District Court in Birmingham Friday.

Last year, Jonathan Wade Dunning received a 112-count indictment that detailed how he allegedly controlled Birmingham Financial Federal Credit Union and stole $14 million in property, assets and federal grants that were supposed to fund healthcare services for poor children, adults and the homeless.

The jury, which heard testimony and evidence from eight attorneys who represented Dunning and seven prosecutors from the U.S. Attorney's office in Birmingham, also found Dunning not guilty on 14 felony charges.

However, after three days of deliberations, prosecutors convinced the jury that Dunning leveraged total control over the credit union to enrich himself, businesses that he owned and others, according to federal prosecutors.

From October 2008 to October 2011, Dunning was the president/CEO of BFFCU.

Dunning managed the credit union to operate under the false pretense of being a legitimate and independent financial institution free of self-dealing and instead manipulated accounts and practices of BFFCU for his own financial gain.

He assumed various positions at BFFCU, including president, board chair and/or loan officer. He also ensured that the supervisory, management and oversight positions at BFFCU were occupied by individuals who would comply with directions from Dunning, according to court documents.

Dunning also leveraged this authoritarian control to gain favorable treatment for himself and his businesses for loans, interest payments, transfers among accounts and other expenditures.

In one instance, for example, he got an $85,000 loan to buy a brand new Jaguar XJL without following the credit union's loan applications procedures and policies, court documents show.

However, Dunning also allegedly abused his positions at the credit union by depositing funds from Birmingham Health Care, which provided healthcare services to the poor, without regard to that organization's ability to pay its own bills, federal prosecutors said.

Before taking over the credit union, Dunning was the CEO of BHC. He later resigned from that post, but remained as a paid consultant to the non-profit organization. He was also the CEO of the non-profit Central Alabama Comprehensive Health Inc., a Tuskegee-based organization that provided primary and preventive healthcare to the poor. He also resigned from CACH, but was retained as a paid consultant.

Both organizations received millions of dollars in grants from the U.S. Department of Health and Human Services.

After resigning as CEO of BHC and CACH, Dunning opened nine businesses. He hired key employees from the non-profit groups and then contracted with BHC and CACH for those same employees to provide their services.

Dunning (pictured at left) also got BHC and CACH to sign contracts with his businesses to provide goods and services. By doing this, Dunning was able to control a large portion of BHC's and CACH's income, according to court documents.

Over six years, Dunning steered $14 million from BHC and CACH to accounts at BFFCU and other banks.

In October 2008, BHC became a sponsor of the credit union. Dunning caused BHC to secure the sponsorship of an existing credit union charter from HABD Federal Credit Union.

According to the court records, Dunning got BHC to agree to promissory notes, loan agreements and other contractual arrangements under which the non-profit organization agreed to pay him at least $1.3 million, purportedly for money he had “loaned” to BHC.

Dunning caused BHC's daily receipts – totaling more than $950,000 – to be deposited into a BFFCU account in the name of BHC rather than into its operating account held at another financial institution.

He also controlled BHC's deposits at the credit union to ensure that he and his businesses received priority payments.

Federal prosecutors said Dunning controlled the mechanics of BHC's income stream in order to increase BHC's apparent financial dependence on Dunning as a lender.

Moreover, when BHC was unable to pay other vendors and creditors after making “priority payments” to Dunning, he would loan money to BHC.

Dunning also used BFFCU funds to pay debts and bills of BHC ostensibly as part of a revolving line of credit agreement between BHC and a company that Dunning operated. Those expenditures, however, were never recorded in BHC's books or records, according to federal prosecutors. Instead, Dunning used BHC's funds allegedly to pay himself, as well as debts and bills racked up by his companies.

On Oct. 27, 2011, the NCUA placed the $1.3 million, 429-member BFFCU into conservatorship. About six weeks later, the federal agency liquidated the credit union. The $131 million CO Credit Union in Birmingham immediately assumed BFFCU's members, assets, loans and debt.

In its semiannual report to Congress from Oct. 1, 2011 to March 31, 2012, the NCUA's Office of Inspector General reported the credit union became “insolvent due to management operating the credit union in an unsafe and unsound manner, including a serious conflict of interest with the credit union's sponsor, a continuous lack of action by management to address issues, persistent non-compliance with established timelines for submitting reports, and problems with the credit union's books and records.”

The estimated loss to the NSUSIF totaled $41,319, according to the OIG.

A sentencing hearing for Dunning has not been scheduled by the U.S. District Court.

Instant Insights /

Former BFFCU CEO Found Guilty of $14M Fraud

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