NCUA official seal. (Source: NCUA)
The NCUA has dismissed a lawsuit against a former credit union executive who for months ignored the federal agency's subpoena that sought documents in connection with more than $600,000 in vehicle loan losses.
According to court documents filed by the NCUA in September, Lori Knight, former EVP of lending at the $37 million Equishare Credit Union in Wichita, Kan., finally handed over documents the federal agency was seeking since December 2020. The lawsuit was filed in U.S. District Court in Wichita.
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Knight abruptly resigned in November 2018 after Equishare President/CEO Gary Torres presented her with a list of loans for vehicles that had been repossessed and sold. But the proceeds from the sales of those vehicles were allegedly not applied to the loans, according to documents filed by the U.S. Attorney's Office for the District of Kansas on behalf of the NCUA.
Knight, who had been working at Equishare for more than 20 years, was responsible for the indirect lending program. She also was responsible for making decisions on loan applications and administering the repossession of the vehicles, selling them and applying the proceeds of those sales to the loans.
In October 2018, Torres discovered that the proceeds of two checks for the sale of repossessed vehicles had not been applied against balances of the loans secured by the vehicles, according to court documents. He found the two checks had been cashed or otherwise presented for payment. The CEO also found numerous other examples of repossessed vehicles that had been sold, but allegedly the money from those sales had not been applied to the appropriate loans.
Torres suspended Knight for violating the credit union's policies, pending further investigation. He set up a meeting with Knight on Nov. 16 to review his concerns. An hour before the meeting, however, Knight emailed Torres that she was immediately resigning from her job, the NCUA said in court documents.
The credit union hired an external auditor to review Knight's activity. The audit allegedly concluded "more than $600,000 in losses to Equishare (was) attributable to Knight's violations of credit union policy, including granting loans in violation of lending policy," court documents stated.
To investigate whether Knight received any benefit from the alleged "misapplied proceeds," the NCUA served a subpoena to her on Dec. 9, 2020. The subpoena demanded that she turn over documents such as credit or deposit accounts, account statements, receipts, bills of sales or lease documents, and other papers from November 2015 to the current date.
Knight was given until Dec. 28 to respond to the subpoena, but she allegedly ignored it. The NCUA then mailed a letter in March to Knight that asked her to contact the independent federal agency, but she allegedly ignored that letter as well.
What's more, she also allegedly ignored "additional communication" in June from the U.S. Attorney's Office in Wichita.
Finally, after the NCUA filed its lawsuit against Knight in August, a federal judge ordered her to comply with the subpoena on or before Sept. 23. She handed over the documents to the NCUA on Sept. 14, according to court records.
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Peter Strozniak
Credit Union Times reporter covering credit union operations, fraud, M&As, leagues, business continuity, and breaking news.
