A former president/CEO will be sentenced in April for embezzling$741,362 from the $4.6 million Corry Area Schools Federal CreditUnion in Corry, Pa.

|

Karen Schenck, 50, of Bear Lake, Pa., pleaded guilty to onecount of embezzlement in U.S. District Court in Erie onDec. 21.

|

According to federal prosecutors, Schenck stole the funds in avariety of ways from January 2008 to August 2015.

|

She made $268,402 in unauthorized or fictitious loans in thenames of her family members. She used those funds for her ownbenefit or to conceal out of balance conditions in various generalledger accounts.

|

Schenck also made more than 60 fake deposits into her ownaccount or the accounts of family members totaling $317,897, whichshe used to pay her personal expenses, and she withdrew more than$95,000 from two member accounts without authorization.

|

Additionally, prosecutors said in a prepared statement, theformer executive made more than $42,000 in loans to herself andfabricated the loan underwriting documents make it appear that shequalified for the loans. She also used the stolen funds to pay offpersonal credit card balances and made unauthorized credit cardlimits that caused more than $17,000 in losses for the creditunion.

|

Steven M. Tessmer, who was appointed president/CEO of Corry AreaSchools FCU in August 2015, said though Schenck was very good atcovering her tracks, red flags were missed by the supervisorycommittee's auditor.

|

“She was a master at covering her tracks, keeping people at bayand she certainly led people to believe that they could trust her,”Tessmer said. “The trust was there but the verification part waslacking. There were things that should have been detected that they(supervisory committee auditors) did not.”

|

For example, the supervisory committee never receivedconfirmation that Schenck appropriated credit union funds for aninvestment that she placed in own name.

|

“She was messing with the credit union Visa credit cardportfolio as well,” Tessmer said. “They didn't do a gross interesttest on the (credit card) portfolio, so the loan portfolio wasgrowing (more than doubled) but they weren't seeing the interestincome increasing. Those things should have been caught by the(supervisory committee) auditors and they should have been caughtby the NCUA examiners.”

|

It wasn't until July 2015 when an annual NCUA audit discovereddiscrepancies.

|

Tessmer said the credit union board has implemented newpolicies, procedures and internal controls to detect and preventfraud.

|

From its fiduciary bond insurance policy, Corry Area Schools FCUrecovered $500,000. What's more, the credit union also received$297,000 from Schenck's personal assets and a number of CDs thatwere seized and liquidated by federal authorities.

|

“Accordingly, Corry Area Schools FCU has been able tosubstantially recover all of the funds embezzled, as well as muchof the fees, costs and expenses associated with investigating andrecovering amounts related to the embezzlement scheme,” DavidArmstrong, Corry Area School FCU board president, wrote in a Dec.9th letter to members.

|

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

  • 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.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.