New charges filed by federal prosecutors Tuesday against formerCFO Michael A. LaJoice detailed how he carried out an $18.6 millionfraud scheme over 13 years at Clarkston Brandon Community CreditUnion in Clarkston, Mich.

A fraud expert who reviewed the court documents said LaJoice gotaway with it because there was no separation of duties at thecredit union and no independent verification of investment accountsLaJoice fictitiously created to conceal his fraud.

Federal prosecutors said LaJoice stole more than $2.5 million byissuing cashier's checks from various credit union accounts withoutauthorization. These checks were deposited in LaJoice's bankaccounts at Capital One Bank, Comerica Bank, Scottrade and the $2billion Genisys Credit Union in Auburn Hills, Mich.

The checks, typically deposited via ATMs, were made payable tothe respective institutions and in the names of fake individuals,according to court documents.

According to the documents, LaJoice also stole more than $16.1million from Clarkston Brandon Community by conducting ACH withdrawals fromthe credit union to his personal accounts held at PayPal, CapitalOne Bank, TD Ameritrade and American Express.

He set up ACH withdrawals to debit funds from the credit union'sinvestment general ledger, which he was responsible for balancing.When the electronic transfer debited the credit union's generalledger investment account, the funds were deposited in his personalaccounts.

After the funds were deposited, LaJoice cleared the creditunion's ledger to delete the corresponding transaction and wiretransferred the funds from his personal accounts to other accounts,including his business account at Comerica Bank.

Internal fraud expert Christopher J. Pippett, a partner at thelaw firm Fox Rothschild LLP in Exton, Pa., said LaJoice managed toget away with this fraud for years because there was no separationof duties.

“Every credit union should have policies regarding separation ofduties,” Pippett said. “In this case, LaJoice had authority towrite the checks and sign the checks, and he also reviewed andposted the accounts, which is why he was able to get away with itto the extent that he did.”

What's more, LaJoice concealed his fraud by creating fictitiousinvestments in certificates of deposits and bonds at the $2.7billion Total Bank in Miami.

These fictitious investments were provided to auditors and stateexaminers to show that the credit union's books were balanced andto avoid detection of the missing funds.

The court documents, however, did not say if auditors and stateexaminers verified the existence of those CDs.

“Credit unions should have a policy by which they periodicallyand randomly verify the existence of CDs whether it's through anauditor or whether it's through someone in the credit union if ithas that capability,” Pippett explained. “Someone should be callingthe banks to confirm they are holding the CDs in the name of thecredit union and in what amounts. If you don't do that, this is thetype of thing that can happen.”

Federal prosecutors said LaJoice used the stolen funds to buildand furnish his new, custom-built home worth more than $1million.

LaJoice's 5,800-square-foot home was originally reported to bevalued at $1.3 million. Michigan police investigators, however,estimated the home to be valued at $4.5 million because it had beenbuilt to include a nine-seat movie theater, three sets of washersand dryers, and other top-of-the-line appliances.

In addition to the custom-built home, he used the embezzledfunds to buy new vehicles, commercial properties and to support alocal dance studio, according to court records.

LaJoice founded LaJoice Properties LLC in April 2015. Thatcompany publicly announced plans in October 2015 to build a retailand residential project on commercial land he purchased with stolencredit union money.

The local media reported LaJoice's plan was the biggestdevelopment project in the history of Fenton, Mich., located about60 miles northwest of Detroit. He has also been the owner of ChasséBallroom and Latin Dance Studio in Fenton since June 2007,according to his LinkedIn page.

In a local newspaper interview in February 2015, LaJoicedescribed himself as an “accountant by day and a dance studio ownerby night.”

Although it's controversial, Pippett said he recommends, in mostinstances, that credit unions have a policy to allow for theperiodic review of c-level employees' credit reports and income taxreturns.

“People who steal, unless they have a drug or gambling problem,use [stolen funds] to buy other things, and that is where it startsto show up,” he said.

LaJoice explained his lavish lifestyle to his wife by tellingher he was getting big returns from stock investments. He toldcredit union colleagues he got a big inheritance.

Federal prosecutors said LaJoice began stealing from the creditunion in January 2003 and continued until January 2016, he walked into the Oakland County Sheriff'sOffice and admitted he embezzled millions of dollars from thecredit union.

He started at the credit union as an account manager and becameits CFO in June 2015.

About a week after LaJoice was arrested and charged withembezzlement by state prosecutors, Clarkston Brandon Community wasplaced into conservatorship by the Michigan Department of Insuranceand Financial Services. In March, the credit union was merged intothe $3.2 billion Michigan State University Federal Credit Union of East Lansingin March.

An arraignment hearing for LaJoice has not been scheduled yet bythe U.S. District Court in Detroit.

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