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Thursday, February 28, 2013

Former Illinois bank president admits embezzlement

The man who was president of a small-town central Illinois bank has pleaded guilty to embezzlement.
Bryson John Russell of Lincoln started working at Hartsburg State Bank in Logan County in 1966. He became bank president in 1989. On Thursday, federal prosecutors said he admitted he stole money from the bank to pay for personal expenses. Officials say Russell did it by taking out loans in the names of bank customers and relatives.
Federal officials say the bank's total loss is between $376,000 and about $562,000. Hartsburg is about 35 miles south of Peoria. It has a population of 314.
Russell is scheduled to be sentenced on June 27. He faces up to 30 years in prison and a $1 million fine. He also may be ordered to pay restitution.

Friday, February 22, 2013

Former credit union director charged with embezzlement in Pennsylvania

Prosecutors say a former director of a North Philadelphia credit union stole more than $500,000 from the institution, a theft that contributed to its collapse.
Miqueas Santana, 43, faces charges of money laundering and embezzlement from the Borinquen Federal Credit Union. The charges were filed Thursday and announced today by U.S. Attorney Zane David Memeger.
Borinquen, a Hunting Park thrift which for decades served low-income Hispanics in North Philadelphia, collapsed two years ago after investigators uncovered a widespread fraud.
Bank manager Ignacio Morales later admitted to laundering fraudulent IRS refund checks, stealing from bank coffers and trying to arrange cocaine deals. He was sentenced last month to more than seven years in prison.
Morales also confessed to letting a member of the credit union's board of directors overdraw on his accounts. Neither he nor prosecutors had identified the director until Santana was charged this week.
According to charging documents, Santana allegedly siphoned more than $528,000 out of Borinquen accounts between 2009 and 2011 for real estate purchases and expenses related to a check-cashing business he owned.
Santana was charged without an indictment, a step that typically suggests a plea bargain.

Wednesday, February 20, 2013

Kingsville, Texas woman arrested in Ohio in embezzlement case involving credit union

A Kingsville woman was arrested Friday in Ohio on suspicion of embezzling funds from a credit union.
Maricella Garza, 37, was arrested following the return of an indictment charging her with embezzling funds from the Kingsville Community Federal Credit Union from Aug. 28, 2009, to July 9, 2010, according to the indictment.
After her arrest, Garza appeared in federal court that afternoon before U.S. Magistrate Judge Sharon L. Ovington.
According to the indictment, Garza was an employee of the credit union and embezzled about $30,555.
If convicted, Garza faces as many as 30 years in prison and as much as a $1 million fine. A bond hearing is scheduled for 1:30 p.m. Thursday in Ohio.

Bank manager pleads guilty to bank fraud, embezzlement charges in Missouri

An Ellington bank manager has pleaded guilty Tuesday to bank fraud and embezzlement charges.
According to the U.S. Attorney's Office, Irvin R. Eddington, Jr., 42, of Ellington, pleaded guilty to bank fraud and embezzlement charges, involving issuing fraudulent letters of credit while he was Vice President and Manager of the Ellington Branch of People's Community State Bank (PCSB).
Attorneys say Eddington created fraudulent PCSB money orders funded by advances from customer lines of credit to get money to pay his bills.
Also, from January 2004 through October 2011, prosecutors say Eddington created and issued a number of fraudulent unsecured irrevocable letters of credit to an associate in the name of the bank worth approximately $1,340,896.
Sentencing has been set for May 20, 2013

Former Central Texas Bank Employee Charged In $6 Million Theft

A former employee of the Whitney 1st National Bank has been summoned to federal court next week to answer a charge of embezzlement of more than $6 million from the bank.
She has not yet been arrested, but Mary Helen (Murty) Lane is charged with embezzlement from a federally insured financial institution of more than $1,000.
Lane is charged on a federal information, meaning she has not been indicted, and has agreed to appear before U.S. Magistrate Jeffrey C. Manske on a summons, a court docket says.
The federal court charging document obtained Tuesday by News 10 says Lane, over a period of 10 years, stole large amounts of cash from the bank's safe and originated false bank documents to cover the thefts.
Lane was employed by the bank for 27 years and she resigned her position as vice president in January 2012.
The charging documents says Lane used most of the cash to finance gambling trips to Las Vegas, Nevada and Shreveport, Louisiana.
The FBI also said that when Lane would return from gambling trips she would give her fellow employees $100 bills which she claimed to be part of her gambling winnings.
Retired FBI Special Agent John Truehitt, who now is the police chief at Lacy Lakeview, said in his report that on at least one occasion the bank in Whitney ran out of $100 bills, and Lane went to her home to get some and bring them back to the bank in exchange for $20 bills from the bank's cash drawers.
During an investigation bank employees told FBI agents Lane made so many trips to gambling venues that she was rewarded with complimentary trips, hotel rooms and food.
FBI investigators also learned Lane purchased several expensive sports cars with funds she took from the bank.
"This old news to us, and was taken care of by our holding company and insurance proceeds a long time ago,” said bank president Mike Farquhar in a statement Tuesday.
“No customer accounts have been affected and this situation did not affect operations of the bank."

Wednesday, February 13, 2013

Fooling The Board: The Embezzlement Bonanza


Over the past few months Credit Union Times has covered at least five different credit unions at which CEO embezzlement and fraud occurred. These failures of leadership have left in their wake an abundance of angered and disillusioned members.
In fact, in a recent exchange of messages with a member of one of these credit unions, I found a person so disenfranchised due to her experience that she is now a bank customer.
Her perspective, and perhaps also the perspective of many other members and credit union leaders, is that the fault lies with the criminals. I agree, but I also believe another body is at fault: the respective boards of these damaged institutions.
While detecting fraud can be a very difficult task, in the case of every one of these situations the performance of the credit union was so poor relative to the industry that the CEO should have been fired for cause. That these boards condoned such performance over so long a timeframe puts them, in my opinion, as much at fault for the fraud as the perpetrators themselves.
In evaluating credit union health, my firm, Glatt Consulting, uses a 5-point rating system to assess and rate individual credit union financial performance. We look at 11 different metrics, assigning health scores for each metric based on where the metric falls in a set of ranges. Scores of 5 reflect the highest degree of health.
A 0 score reflects the lowest degree of health. In looking at these credit unions through the lens of our scoring system we find that each of them performed well below what we would term an average, healthy credit union. Specifically, over 10 years, the average HealthScore for this collection of credit unions was 1.8 versus the industry average of 2.48 over the same timeframe. This is a significant difference.
The question is, why did these boards allow for such anemic levels of performance? While a skilled fraudster can hide their activities well, none of the CEOs in question were leading healthy credit unions. The financial performance of their respective credit unions was highly visible, in plain sight, in black and white – and not good.
In early January of this year I was quoted in Robert McGarvey's CU Times article titled, "Fire the CEO: When the Time Has Come," as follows:
"It is surprising how infrequently CEOs are let go. Perhaps it should happen more often."
Poorly performing credit unions like these formed the basis of my perspective and were the catalyst for sharing that particular sentiment with Mr. McGarvey.
Yes, the job of a volunteer credit union board member is often difficult, complicated, and thankless. Regardless, a board's responsibility to the ownership for preserving credit union health and sustainability never goes away no matter the complications or the level of appreciation. Firing, terminating, letting someone go – whatever you call it – boards must empower themselves to act in the face of persistent poor performance.
I admit I was not in the board meetings of these fractured credit unions. I don't know for sure what board members were told by the CEO, how financial performance was shared, or what the methods for holding the CEO accountable to results.
I also acknowledge that these were small credit unions and often small credit unions lack solid reporting tools and face challenges maintaining strong checks and balances. But even in offering these plausible excuses for a lack of awareness, it still does not absolve board members of poor governance performance.
What we see in the failure of leadership showcased in the embezzlement cases of these five credit unions is a cautionary tale regarding boards allowing themselves to be ineffective, and their institutions fooled and undermined by exceptionally stupid criminals.

Tuesday, February 12, 2013

Former bank vice president sentenced for embezzlement in Idaho.

A former bank vice president will serve 15 months in prison for embezzling more than $142,000.
Chief U.S. District Judge B. Lynn Winmill sentenced Deanne Marie Cottle, 63, to serve 15 months in prison for the crime, as well as two years of supervised release in the future, according to a news release. She will also have to pay a $2,000 fine.
As part of a plea agreement, the Swan Valley resident admitted that she embezzled funds from the Bank of Commerce of Idaho Falls, where she formerly worked as the vice president of security and the director of human resources. She converted 31 checks from health insurance carriers to the bank, and then used cashier’s checks to deposit the money in a personal credit union account, according to the news release, which adds that she has made full restitution to the bank.
“The detection and prosecution of the crime in this case exemplifies efforts underway by President Obama's Financial Fraud Enforcement Task Force (FFETF),” U.S. Attorney Wendy J. Olson said in the news release. “Thanks to the dedicated work of the FBI in this case, and the ongoing work of the FBI and other partners, the District of Idaho is proud to be a successful part of this important program. We will continue to work with our partners in the law enforcement community – federal, state and local – to identify and prosecute those who commit fraud.”

Monday, February 11, 2013

Solomon woman sentenced to 3 years, fined for embezzlement in Kansas

A northeast Kansas woman who said she embezzled from the credit union where she worked to save the family farm has been sentenced to three years in prison.
The U.S. attorney’s office says 48-year-old Pamela Emig, of Solomon, must also pay $817,000 in restitution under the sentence she received Monday.
Emig pleaded guilty in November to one count of embezzling from Enterprise Credit Union, in Enterprise, between 2005 and 2011. She was a manager and kited checks between accounts under her control to cover up the thefts.
Defense attorney Christopher Joseph says in a filing that Emig was a conscientious employee for nearly 30 years until desperation influenced her “aberrant actions.”
The thefts began when she and her husband filed for bankruptcy and had no money to feed their cattle.

Saturday, February 9, 2013

Former credit union teller admits embezzling from customer accoun

An Idaho Falls woman pleaded guilty Friday to one count of embezzlement by a credit union employee after she admitted to taking about $23,000 from customers’ accounts at an Idaho Falls Westmark Credit Union branch.
      The charge Virginia Mecham, 40, faces is punishable by up to 30 years in prison, a maximum fine of $1 million and up to three years of supervised release. According to U.S. Attorney Wendy J. Olson, the suit was filed in United States District Court in Pocatello on January 31, 2013 after several customers contacted the credit union to inquire about unauthorized withdrawals from their accounts. After examining credit union records, it was determined that all of the customers’ accounts were handled by Mecham, a credit union teller.
     Mecham admitted she embezzled the money and that she spent it on various personal expenses, according to the plea agreement. She has agreed to pay restitution in the amount of $23,625.
     The sentencing date is set for April 30 before Chief U.S. District Judge B. Lynn Winmill at the federal courthouse in Pocatello.
    The case was investigated by the Federal Bureau of Investigation.
     This announcement is part of efforts underway by President Obama's Financial Fraud Enforcement Task Force, which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s described as the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. 
    Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes, enhancing coordination and cooperation among federal, state and local authorities and addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. 
    Over the past three fiscal years, justice department officials have filed more than 10,000 financial fraud cases against nearly 15,000 defendants,  including more than 2,700 mortgage fraud defendants. 

Friday, February 8, 2013

Embezzlement Through Online Entries & Wire Transfers


How often does your bank reconcile general ledger control accounts to subsidiary ledgers? Does your accounting system allow out-of-balance conditions to exist between the general ledger and subsidiary ledgers? Are employee, officer and director accounts periodically reviewed for unusual activity?
Hopefully, the answers to these questions are “daily,” a resounding “no” and “yes,” respectively. However, all too often, reconciliations are overlooked that leave holes in the accounting system and internal controls that are not known until it is too late. If the accounting system allows an out-of-balance situation between ledgers, an employee can wreak havoc on the financial institution for years before being discovered, if ever.
Example 1 – $5 Million in Improper Wire Transfers
In the case of one bank, the chief financial officer (CFO) was able to capitalize on an out-of-balance situation between the bank’s deposit subsidiary ledger and general ledger. The CFO was aware of the potential for the out-of-balance situation because he had chosen the bank’s core accounting system software. He also had the ability to make journal entries, and since the bank was a small institution, he knew no one else would reconcile the two ledgers; this was solely his function.
For more than 15 years, this CFO illegally obtained more than $5 million through two methods. First, he set up a straw checking account under the name of a relative of his wife. The CFO then created journal entries depositing money into the account and would write checks out of the account with the CFO as payee. The second method involved unauthorized wires to an E*Trade account and to an account at a credit union in a neighboring town. The wires to the E*Trade account were made possible through accounting entries to the bank’s Federal Reserve account and the deposit control account, which created an out-of-balance condition.
Since another bank employee conducted the wire transfers, the CFO would print instructional emails from the actual vendor, manually cut and paste a slightly different company name and account number—belonging to the CFO—into the email, then photocopy the “new” email and provide it to the bank employee as support for the unauthorized wire transfers. This scheme was identified by bank examiners who noticed the bank’s correspondent account was out of balance.
Example 2 – $200,000 in Online Entries to ATM Accounts
In another case, a bank employee was able to embezzle approximately $200,000 through journal entries using ATM-related accounts, such as the ATM clearing account or ATM adjustments account, to offset transactions into the employee’s own accounts. For example, the employee would credit her checking account for $250 and debit the ATM adjustments account. The employee also would do this to benefit family members’ accounts and to help pay down her mortgage loan at the same bank. Another bank employee discovered the scheme during a reconciliation of the internal ATM clearing account.
Don’t Be a Victim
There are several ways a financial institution can protect itself and prevent these situations from occurring. The one common thread between the issues in the two banks is that reconciliations can uncover improper and/or unauthorized transactions. In addition, a financial institution should not have an accounting system that allows out-of-balance situations to occur; the correspondent account should be balanced daily.
In addition, management should periodically review employees’ accounts, looking for any unusual activity or unexplainable income into the account(s). All accounts, including the ATM clearing or settlement accounts, should be periodically reconciled. This may be one of the quickest ways to detect potentially improper activity. Typically, the only deposit information in an employee’s account relates to payroll. Deposits outside of payroll activity, especially deposits by bank journal entry, should be questioned.
Review the ATM clearing and settlement accounts, as these should zero out daily. Determine the reconciling items and their legitimacy. Also, review the entries for the accounts. In most cases, the entries are in large batches; if you see small batches, there might be a problem.

Wednesday, February 6, 2013

Ex-Mount Pleasant bank teller pleads guilty to 15-year embezzlement scheme in South Carolina on February 6, 2013

A former Mount Pleasant bank teller has pleaded guilty to embezzling more than $700,000 from Bank of America over 15 years.
Michele Gentry, 59, also was charged with filing a false income tax return.
Gentry waived her right to an indictment and pleaded guilty to the two counts in front of U.S. District Court Judge Richard M. Gergel in Charleston on Monday.
She remains free on a personal recognizance bond.
Assistant U.S. Attorney Rhett DeHart told Gergel that said Gentry stole about $720,000 in federally insured deposits in $500 to $2,000 increments while working as lead teller at a Bank of America branch in Mount Pleasant from 1996 to 2011. She used fictitious documents to cover up the thefts.
Prosecutors also said she failed to report $104,425 she received from the embezzlement on her 2007 federal tax return.
Gergel did not schedule a sentencing date.
Gentry faces a maximum penalty of 33 years in prison, $1.1 million in fines and six years in a supervised release program. The court also will determine restitution.
Alan Toporek, Gentry’s defense attorney, declined to comment.

Tuesday, February 5, 2013

Former Chase Bank exec charged with embezzlement in West Virginia on February 4, 2013

A former Charleston-based Chase Bank executive has been charged with embezzlement by a bank employee, U.S. Attorney Booth Goodwin announced.
According to a court document filed Monday, Mark McCoy, 46, of Charleston, was charged with embezzling thousands of dollars from his employer.
McCoy worked as the vice president of private client banking services at the bank's Charleston branch from September 2008 until June 2012.
According to an information filed yesterday, during his employment at Chase Bank, McCoy embezzled thousands of dollars of funds belonging to Chase Bank.
McCoy faces up to 30 years in prison and a fine of up to $1 million.

Saturday, February 2, 2013

Former bank executive admits embezzling from Bank of America in Texas on February 1, 2013

Donnie Wright, 53, of Lubbock, Texas, appeared Thursday in federal court and pleaded guilty, before U.S. District Judge Sam R. Cummings, to one count of embezzlement of funds by a bank employee. Wright, who remains on bond, faces a maximum statutory penalty of 30 years in federal prison, a $1 million fine and restitution. Judge Cummings ordered a presentence investigation report with the sentencing date to be set after the completion of that report. Today's announcement was made by U.S. Attorney Sarah R. Saldana of the Northern District of Texas.
According to documents filed in the case, Wright was employed by Bank of America in Lubbock, as a Branch Manager at the 5144 82nd Street location. The factual resume states that Wright was a member of the Board of Deacons and Trustee at Community Baptist Church (CBC) in Lubbock. Beginning in May 2006 and continuing to January 24, 2010, Wright used his position as a Bank of America employee to embezzle funds owned by CBC and entrusted to the custody and care of Bank of America. He employed a variety of methods to embezzle the funds, including embezzling from CBC's Certificates of Deposits held at the bank; making cash withdrawals from CBC's accounts using debit (withdrawal) tickets; and fraudulently drawing checks on CBC's checking account.
The case was investigated by the FBI and the Lubbock Police Department. Assistant U.S. Attorney Amanda R. Burch is in charge of the prosecution.