Search This Blog

Thursday, June 20, 2013

Former head of closed Vt. credit union indicted

 The only employee of a small northern Vermont credit union that was taken over last year by federal regulators is now facing embezzlement charges.

Earlier this month a federal grand jury in Burlington indicted Debra Kinney, the CEO of the now closed Border Lodge Credit Union, on an embezzlement charge.

The indictment alleged Kinney did "willfully embezzle, purloin and misapply moneys and funds" of the credit union.

Last November the Vermont Department of Financial Regulation closed the Derby Line-based credit union, which was first chartered in 1963.

An attorney for Kinney did not immediately return a phone call seeking comment.

The former chief executive officer of a Derby Line credit union pleaded not guilty in U.S. District Court in Burlington to accusations she embezzled “several hundred thousand” dollars from customer accounts.

Debra J. Kinney, 58, of Derby Line deposited money from the Border Lodge Credit Union into her Passumpsic Savings Bank account, and she also deposited money in an account for a close friend, the FBI stated in court papers.

U.S. Attorney for Vermont Tristram Coffin said the actual amount of the loss is still being compiled, but he believes when completed it will be at least several hundred thousand.

She and her husband, James, did not respond to questions as they left the courthouse on Elmwood Avenue during the noon hour.

Special Agent Danny Rachek, who directs the FBI in Vermont, wrote in court papers that Kinney was involved in embezzlement and willful misapplication of funds belonging to a credit union insured by the National Credit Union Administration.

Rachek said a state examination showed $207,000 was taken from various member accounts from April 4, 2011, to July 12, 2012, and placed into an account maintained by Kinney’s friends.

Rachek also wrote that $79,108 was withdrawn from member accounts and placed in an account maintained by Kinney and her husband, James Kinney, from June 13, 2011, to June 6, 2012.

The FBI and state regulators closed down the credit union during a court-ordered raid Nov. 30. The offices were at 138 Beauchesne St., primarily in the basement of Kinney’s home, court records state.

Coffin, who is handling the prosecution, said Thursday the credit union remains closed and has been placed in receivership. He said the National Credit Union Administration is serving as the liquidating agent and assessing claims by customers.

Commissioner Susan Donegan of the Vermont Department of Financial Regulation declined Thursday to answer questions about the matter. She referred inquiries regarding what the state has done for customers during the past seven months to a department lawyer, who did not respond.

Court papers cite the credit union’s other full-time employee with blowing the whistle on Kinney’s handling of some accounts. The name of the whistle-blower is not included.

Kinney had written two checks for $20,000 and $10,000 and deposited them into a friend’s account, the FBI stated. The friend is not identified in court papers.

Kinney, when confronted, could not explain the checks, and the money was returned to the original account, the FBI said.

In February 2012, when more problems were uncovered, the state required the credit union to work with an outside accountant to verify the accounts of all members.

Facing the judge
In court Thursday, U.S. Magistrate Judge John Conroy agreed to release Kinney on conditions including that she not be arrested on any new criminal charges and that she possess no firearms.

Conroy approved a request from defense lawyer David Sleigh for 60 days to review the case and file motions.

“It’s voluminous, being a documents case,” Conroy said.

Border Lodge Credit Union initially was chartered by the state in 1963 and insured in 1978. It had about 1,100 members and $3.1 million in assets when raided, the FBI said.

Border Lodge served employees of varied and approved occupational groups who work in Orleans County. Among them was Tivoly Inc., a machine tool company in Derby Line; Newport City Schools; Newport Ambulance; and the town of Derby, the FBI said.

Each deposit is federally insured for up to $250,000.

Stephen W. Kimbell, the former commissioner who shut down the Border Lodge, said in November the state had asked the National Credit Union Association to liquidate the credit union. “Our examiners discovered issues that raised serious concerns,” Kimbell said at the time. “I determined that exercising my authority to take over the credit union was the best way to protect depositors and the assets.”

Border Lodge Credit Union was the eleventh federally insured credit union liquidation in 2012.

No comments:

Post a Comment