A former president of a small Illinois credit union was accusedof misapplying about $550,000 in a loan scheme that benefittedmembers with bad credit and minimized the institution's loandelinquencies, according to court documents obtained by CUTimes.

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Charles Juska, former president of the $25 million TazewellCounty School Employees Credit Union in Pekin, Ill., pleaded notguilty to charges he forged at least seven members' signatures, created numerousfraudulent loans over a five-year span and cooked the books tocover his tracks, the documents said.

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Juska, 52, who was indicted in May, pleaded not guilty June 26in U.S. District Court in Peoria, Ill., and was released on bondwith his next court set Aug. 7, according to court records. He isfacing 10 federal counts of misapplication of funds and false entryinto records.

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The allegations follow a wave of employeearrests for embezzlement and other fraud at credit unionsduring the past few years, which some experts contend could damagethe industry's reputation.

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Juska, who served as the credit union's president for 17 yearsbefore his departure in December 2010, allegedly orchestrated anelaborate loan scheme that involved creating unauthorized loans andaccounts, shifting money between the accounts and falsifying thebooks, the court documents said.

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For members who were not eligible for a loan or having troublemaking loan payments, Juska created loans in the names of othermembers by forging signatures, and used those funds to cover othermembers' loans and delinquencies, the indictment stated.

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The court documents do not specify whether Juska profitedpersonally from the alleged crimes.

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In the loan applications, he provided false information,including listing collateral that allegedly did not exist, failedto verify the value of other collateral, and used the samecollateral for multiple loans, resulting in unsecured orunder-secured loans, the indictment stated.

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The former banker also concealed delinquent loans from his boardof directors and loan committee by adjusting loan rates to lowerthe payments and not revealing the lower rate to the board, thedocuments said.

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In addition, he allegedly created new loans for members withdelinquent loans and used those funds to make payments on thedelinquencies, court records stated.

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He also concealed some delinquencies by writing loan advances onexisting loans, allowing members to use the advances to makepayments on the same loans, the documents said.

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According to the credit union's financial reports posted on theNCUA's website, TCSECU's net worth took a major hit in the finalquarter of 2010, when Juska left the cooperative. The credit unionreported 8.71% net worth as of Dec. 31, down sharply from 12.43%the previous quarter. Net charge offs increased from 3.75% ofaverage loans during the third quarter 2010 to 15.03% the fourthquarter. Additionally, the credit union reported a $1.2 million netloss for 2010.

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Since then, TCSECU has recovered its net worth to 10.87% as ofMarch 31, 2014. However, profitability has not returned. As ofyear-end 2013, the credit union reported a nearly $90,000 net loss,and reported another $31,219 net loss as of March 31, 2014.

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As one of the conditions of being released on a personalrecognizance bond, Juska must notify any present or future employerabout the charges, if the employment involves conducting any dutiesrelated to financial transactions or accounting.

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