A U.S. District Judge in Denver ordered the founder of a fakecredit union to pay more than $1 million in civil penalties and asrestitution for bilking members out of $532,000 in boguscertificates.

According to court documents, Judge John L. Kane issued hisfinal judgment Oct. 8 against Stanley B. McDuffie of Denver, whofounded HerMajesty's Credit Union in the Virgin Islands and sold $532,591in CDs to four members. Judge Kane ordered McDuffie to pay thattotal amount and an additional $532,591 in a civil penalty to theU.S. Securities and Exchange Commission.

Although McDuffie obtained a basic license to open HMCU in theVirgin Islands in 2007, the credit union was not chartered by theNCUA or by any U.S. state, and was not subject to regulations, theSEC charged in its civil lawsuit filed against McDuffie in November2012.

Through its website, HMCU “falsely and fraudulently” stated thatthe cooperative was regulated and was affiliated with CUNA,according to court documents. HMCU also claimed itshigh-interest CDs, sold from December 2008 to September 2012, wereinsured by Lloyd's of London, but that also was false, the SECcharged.

The SEC said McDuffie used the CD funds to pay for flight lessons, rent forapartments and office space, credit union software, travel andlawyers.

When members attempted to redeem matured CDs in December 2011,they were told the funds were “tied up.” That eventually led to theSEC lawsuit. 

McDuffie had a prior involvement with a failed credit union,Jilapuhn Federal Credit Union in Georgia. That entity was shut byregulators in 2005, eight months after McDuffie launched it.

McDuffie, who also went under the aliases of Stanley Roberson,Stanley Battle and Stanley Robertson-Baffle, was banned by the NCUAin 2011. Roberson had been convicted of contempt of court and sentenced to six monthsin jail for not complying with a subpoena by Coloradoofficials investigating HMCU's sales of securities. HMCUoperated an office in Denver.

Last August, McDuffie was about to receive approval for abusiness application to run an airport shuttle business in New Mexico when state authoritiescaught wind of his prior conviction and other dealings.

McDuffie applied for a business license to run Sun Shuttle, anairport transport service around Santa Fe, N.M., according to theNew Mexico Public Regulation Commission.

Michael Cadigan, an attorney who represented a cab companychallenging McDuffie's application, discovered his affiliation withHMCU after doing a Google search and alerted New Mexico authoritiesduring a July 31 hearing. Cadigan eventually pulled McDuffie'sbusiness application for the airport shuttle.