X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

GONZALES, La. – While credit unions have so far remain relatively unscathed by the accounting debacle that struck Wall St., one CU is taking its accountant to task for failing to perform its duties to the credit union. The $35 million Ascension School Employees Credit Union, based in Gonzales, Louisiana, has sued its former accountant, alleging that the firm failed to perform the due diligence that would have prevented the credit union from losing $4 million in an investment fraud. The credit union was one of the victims of Pennsylvania-based Bentley Financial Services, which the Securities and Exchange Commission shut down in October 2001, calling the firm’s activities a “ponzi scheme.” The lawsuit seeks to recover the difference between how much of the credit union’s loss that a federally appointed receiver is able to recover for the credit union and what the credit union actually lost. “To date, the receiver has accepted the majority of the claims and estimates that the credit union will recover approximately 95% of its investment through the receivership,” said ASECU CEO Dorothy Wall. That would indicate the lawsuit will seek to recover about $200,000. But Mark Beebe, the lawyer with the Baton Rouge-based law firm Adams and Reese, who is representing the credit union expressed caution about whether the receiver will be able to find enough assets from Bentley to cover 95% of the credit union’s losses. “That would mean Bentley had a lot of assets which were easy to find,” Beebe said. “The suit could be for as much as $4 million if the receiver is unable to find the funds.” Beebe said he anticipates the receiver will be able to give a more thorough accounting of exactly what it is able to recover sometime in the first quarter of 2003. Based on that figure, Beebe said he anticipates settling with the accountant, though he added that the credit union was prepared to take the dispute to trial if necessary. According to the suit, the accounting firm of Provost, Salter, Harper and Alford, L.L.C., based in Baton Rouge, failed to diligently inform the credit union about discrepancies in the credit union’s investments with Bentley which it discovered while serving as the credit union’s independent auditor. The suit alleged that in 1998 Provost contacted some of the financial institutions, which, according to Bentley, held certificates of deposit for the credit union’s investments. The financial institutions replied that the certificates of deposit did not exist, and Bentley referred the accountant to another firm that it had created to facilitate the scheme. That firm, of course, verified the certificate’s existence and, crucially, the accountant failed to give any of this detail to the credit union, the suit alleged. “Their duty as accountants was to pick up the phone or let the credit union board know that the financial institutions didn’t know about the existence of the CDs and to let them know that they should follow up or have their general counsel do so,” Beebe said. “Instead they compounded the error in 1999 and 2000 by reporting the existence of the investments that, in fact, did not exist,” Beebe said. “Provost’s failure to properly confirm the existence of the investments and its failure to accurately report its findings were violations of Provost’s professional responsibilities to the credit union,” he added. According to the NCUA, Ascension’s return on average assets was -2.73 in June of 2002, down from 0.66 in December of 2001. Beebe couldn’t confirm that the drop came about the from the Bentley affair’s losses, but “imagined” that it did. [email protected]

Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.

Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical CUTimes.com information including comprehensive product and service provider listings via the Marketplace Directory, CU Careers, resources from industry leaders, webcasts, and breaking news, analysis and more with our informative Newsletters.
  • Exclusive discounts on ALM and CU Times events.
  • Access to other award-winning ALM websites including Law.com and GlobeSt.com.

Already have an account?

 

Credit Union Times

Join Credit Union Times

Don’t miss crucial strategic and tactical information necessary to run your institution and better serve your members. Join Credit Union Times now!

  • Free unlimited access to Credit Union Times' trusted and independent team of experts for extensive industry news, conference coverage, people features, statistical analysis, and regulation and technology updates.
  • Exclusive discounts on ALM and Credit Union Times events.
  • Access to other award-winning ALM websites including TreasuryandRisk.com and Law.com.

Already have an account? Sign In Now
Join Credit Union Times
Live Chat

Copyright © 2022 ALM Media Properties, LLC. All Rights Reserved.