Timing and luck allowed a former manager to get away with embezzling nearly $500,000 over 17 years from a small Pennsylvania credit union.

Catherine M. Linton, 58, pleaded guilty Wednesday to one count of embezzlement in U.S. District Court in Pittsburgh. She admitted to stealing $478,285 while she was the manager of the $4.1 million Trailblazer Federal Credit Union, which served 1,535 members.

Her fraud led to the insolvency and closure of the Washington, Pa.-based cooperative in July 2015 by the NCUA.

She began working at the credit union in 1993 as its first manager, but she didn't start committing fraud until January 1998, according to court records.

In addition to taking cash from teller drawers, Linton also allowed two members to have negative balances. One of them was a U.S. Army major with a gambling problem.

Although two other people worked at the credit union, Linton had complete control of Trailblazer's operations, including handling the cash and balancing the books and ledgers.

But Linton didn't cook the books to conceal her fraud. Instead, it was a matter of timing and luck, according to Assistant U.S. Attorney Robert S. Cessar.

When Linton ordered cash from the Federal Reserve, she ordered an extra amount of money to cover up any missing cash she took from the teller drawers. She used the cash to pay debts and expenses but generally did not steal large amounts of cash.

“From a practical standpoint, her theft of money was an issue for having enough cash on hand for the day-to-day customer operations,” Cessar wrote in court papers. “In order to make up for the missing cash, Linton stated, 'If we needed $10,000 in cash and I'd taken $5,000, I would order $15,000.'”

To conceal the missing cash, she relied on knowing when the examination or audit was going to take place.

“Before the scheduled exam/audit, Linton would determine the shortfall in physical cash and order enough cash to cover it,” Cessar wrote. “She did not post the cash order transaction into Trailblazer's internal accounting system until after the examination or audit was complete, therefore concealing the account imbalance.”

After the audit or exam was completed, she posted the cash order. Linton told Cessar that if she did not know when the examiners or auditors were coming, they could have detected her theft earlier.

“She did not use false or misleading journal entries to conceal the theft from examiners/auditors,” Cessar wrote in court documents. “It was simply a timing issue and she said she was lucky the examiners/auditors never asked her to access the Mid-Atlantic Corporate account.”

As the scheme continued over the years, Linton's method of concealment required abnormally large case orders, which exposed her theft.

Linton said in court documents that she could not remember whether it was NCUA examiners or independent auditors who inquired about the abnormally large cash orders. She lied to them saying that she must have mistakenly typed an extra zero when placing the order.

The former manager also admitted to concealing from the auditors, examiners and board of directors large negative cash balances for two members. They kited checks to hide their negative balances from auditors and examiners, according to court records.

One of the members had a negative cash balance of more than $200,000, and Linton said he knew some of the checks the member used to conceal the negative balances were from the member's deceased grandfather's checkbook. The member promised to pay the money back from a $250,000 lawsuit settlement, which Linton was aware of. Court documents did not say whether the money was paid back.

The other member, a U.S. Army major, had a gambling problem. Linton helped him hide his negative balances because his job would be on the line. Court documents did not specify the amount of the major's negative balance.

However, Linton also helped these members because she feared it would have brought on more scrutiny by auditors and examiners.

According to Cessar, the two members did not defraud the credit union because they were doing what Linton allowed and, in some cases, instructed them to do. Linton also was not promised any favors, kickbacks or other benefits from the members for allowing their negative account balances.

Linton is scheduled to be sentenced on Oct. 25.

Instant Insights /

Credit Union Manager Admits to Embezzling $500,000

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