On Feb. 11, 2020, the National Credit Union Administration (NCUA) Office of Inspector General (OIG) issued a Material Loss Review (MLR) of C B S Employees Credit Union. The former CEO of the now liquidated credit union embezzled approximately $42.2 million dollars, primarily through the misappropriation of funds using fraudulent official credit union checks. The embezzlement occurred over a 20-year period and the CEO acted alone. The OIG found the fraud remained undetected for so long in large part because of the lack in segregation of duties. The former CEO possessed the following:

  • Access to official credit union checks which enabled him to alter the physical records of credit union checks;
  • “Super-user” access to the credit union accounting system which enabled him both to alter the check payee information and to alter file maintenance reports which concealed this action; and
  • Sole responsibility for financial reporting which gave him the ability to prepare fraudulent financial statements.

The OIG also determined that the quality of Supervisory Committee audits and member account verifications was poor.

Author

John Zasada, JD, CAMS – Compliance Consulting Director, Financial Institutions Group. John can be reached at zasada@doeren.com.