In late April, the NCUA asked U.S. Court Judge Terry A. Doughty in Shreveport to issue a decision that would allow the federal agency to sue Heard, McElroy & Vestal (HMV), a Louisiana CPA firm, for alleged accounting malpractice. In Louisiana, state law requires a public accountant review panel by the Society of Louisiana Certified Accountants to review all claims against certified accounting firms before any civil lawsuit can be filed.

HMV, however, is trying to get the NCUA's review panel proceeding and its claims dismissed. The CPA firm argues the NCUA's claims were subject to the extended three-year peremptive period, which began after the federal agency became the conservator. Because the NCUA brought its claims more than three years after its appointment as conservator of the credit union, the federal agency's claims must be dismissed.

The NCUA alleged that HMV failed to properly conduct annual financial statement audits of Shreveport FCU. Because of its errors and omissions, the NCUA claimed, it was damaged and suffered a significant financial loss.

HMV did not respond to CU Times' request for comment regarding the NCUA's allegations.

Alesia Smith Cummings served as Shreveport FCU's de facto CFO and died at the age of 51 on April 12, 2017, the day before the NCUA conserved the credit union for "safety and soundness" issues. By October, the credit union that was chartered in 1956 and served more than 22,000 members was liquidated.

The NCUA claimed that Cummings was a long-time friend and associate of former CEO Godfrey-Smith. To be clear, the NCUA did not accuse Godfrey-Smith of any wrongdoing in its findings that were reported in court documents.

Cummings was allegedly the only person engaged in a long-term embezzlement scheme, which the NCUA claimed its examiners independently uncovered during the spring of 2017.

The alleged fraud included posting phony deposits to an array of automated clearing house receivable accounts such as undistributed payroll, accrued vacation and 401(k) match accounts. Cummings also allegedly created fake fees that were used to pay bonuses to employees, including large bonuses to Smith. The federal agency also claimed Cummings embezzled funds by making transfers from the ACH clearing accounts to her account, an account she jointly owned with her father to other accounts owned by Smith.

"She worked in the accounting department for 20 ++ years," Godfrey-Smith wrote in an email to CU Times. "She was not a friend then, and she was not a friend when I fired her after finding her embezzlement."

Godfrey-Smith said she fired Cummings in February/March 2017 after the NCUA questioned the fake ACH list of outstanding items for settlement deposits on the Southwest Corporate Bank. That's when Godfrey-Smith said she discovered a part of Cummings' scheme, which totaled more than $700,000.

"The fictitious fee income might have been discovered after SFCU was conserved," Godfrey-Smith said. "During my efforts to try and figure out the ACH items/Southwest Corporate Bank reconciliations, I found her transferring fee income to a joint account in her dad's name and her name and then transferring $8,000 ++ monthly to a Visa card. This same Visa card also had huge Apple Pay charges on it," her email stated.

In response to the NCUA's allegation that Cummings allegedly created fake fees that were used to pay bonuses to employees, including large bonuses to Godfrey-Smith, the former CEO said the credit union had an incentive and bonus plan for all employees based on their performance and years of service, but they were not exorbitant or unreasonable. She said she does not believe Cummings used these phony fees to pay for employee incentives and bonuses, but only to cover up her alleged embezzlement.

Shreveport FCU's issues first surfaced in 2014 when examiners noted in their reports that Shreveport FCU accessed two lines of credit at its corporate credit union several times a year to cover expenses even though the credit union's books showed adequate operating liquidity. However, management assured examiners that the credit union had ceased such borrowings.

NCUA examiners also said Cummings allegedly did not understand GAAP and the accounting staff allegedly did not understand how to properly reconcile general ledger accounts, which the examiners said could result in a gross misstatement of financial statements.

However, Godfrey-Smith said Cummings had a college degree in accounting and the staff was educated and experienced in accounting. The former executive also noted that she was never told by the NCUA or a CPA firm about these alleged issues. Godfrey-Smith also said she relied on the accounting staff and those the credit union contracted with to confirm the accuracy of their work.

However, NCUA examiners also said they identified numerous general ledger accounts that did not have documentation to support the balances listed in Call Reports, and that management was unable to provide examiners with reconcilements or supporting documentation for requested general ledger accounts.

According to the NCUA's court documents, Shreveport FCU accounting staff could not provide proof that outstanding deposit items listed on the account reconciliation for ACH payroll had cleared, and that the accounting staff was also unable to identify reconciling items and tie the items to the clearings listed in the Louisiana Corporate Credit Union account.

These findings led the NCUA to issue a Document of Resolution that required the credit union to hire an external CPA firm to reconcile every general ledger account and a financial statement audit expressing an opinion on the credit union's year-end 2014 financial statements.

Although HMV knew about the NCUA's exam findings, the CPA firm in 2014 and 2015 did not alter its planning or performance of Shreveport FCU's annual audit and merely conducted basic audit procedures without consideration for increased audit risk while planning and performing the year-end financial statement audits, according to the NCUA.

The federal agency alleged HMV issued unqualified audit opinions, concluding that Shreveport FCU's year-end financial statements in 2014 and 2015 were fairly stated in all material respects.

By late 2016, Shreveport FCU's board of directors again retained HMV for another annual audit, but it was never completed because in the spring of 2017, the NCUA claimed its examiners independently uncovered Cummings' embezzlement scheme. However, Godfrey-Smith said immediately after she discovered the theft, Cummings was fired in February/March 2017.

"By August 31, 2016, Cummings' embezzlement and cover up resulted in more than $13.1 million in outstanding ACH deposits listed in SFCU's ACH clearing account," according to the NCUA's court documents. "These fictitious ACH deposits were greater than the $13.014 million balanced listed in SFCU's corporate account with Louisiana Corporate Credit Union."