LAKEWOOD, Ohio-The failure of two credit unions here due to fraud has CUs in the area saying they are finding it challenging to maintain their good name, and at the same time believe they are being given extra scrutiny by regulators.
The name of all credit unions in northeastern Ohio was significantly tarnished by the negative press surrounding the massive St. Paul's Croatian FCU failure in 2010, the largest natural-person credit union failure in history. Since its collapse, the story has remained in the news as dozens of people have been indicted and imprisoned as part of a huge scam involving falsified loans.
Now negative reports about a credit union are back in the news here, following the collapse of the $24 million Taupa Lithuanian Credit Union, allegedly as the result of an embezzlement by its former CEO Alex Spirikaitis. Spirikaitis is now being pursued by the FBI as a fugitive.
For other credit unions in the area that serve ethnic memberships, especially immigrants and descendants of immigrants from Eastern Europe, it has been a struggle to make clear they are healthy and not involved in similar misdeeds.
"It was shocking to everyone in this community, not only the credit union's conservatorship but what has happened with Mr. Spirikaitis," said Guna Foraker, CEO of Latvian Cleveland CU.
Reaching Out
Latvian Cleveland, along with Eaton Family FCU, have reached out to members of the failed Taupa Lithuanian. LCCU has received approval from Ohio's regulator to expand its charter to include people of Lithuanian descent. Foraker said she made the request for the expanded charter as soon as she heard NCUA took over TLCU. The state responded with an approval within two days.
"We called the Division of Credit Unions because we thought the charter addition was logical. Lithuania is one of the Baltic states," said Foraker. "We already serve an Estonian membership, and the cultures and languages of the two memberships are very similar. We wanted to reach out to our sister countrymen and offer them our credit union's services, and did not want them to lose out on all the benefits a credit union can offer."
Foraker said that as NCUA mails out deposit checks to TLCU members a letter is being included stating the members are eligible to join Latvian Cleveland. Shortly after Taupa Lithuanian was conserved, Foraker told Credit Union Journal that her CU had yet to receive any calls from the TLCU membership, but did get some inquiries from existing members asking if Latvian Cleveland was OK.
"We reminded them that what happened at Taupa Lithuanian has nothing to do with our credit union, and that we are thriving and strong, with capital above 13%."
The Taupa Lithuanian takeover, the fraud allegations against Spirikaitis and his alleged flight from authorities have rocked communities in which the church is big part of both memberships, said Foraker. TLCU is located on Cleveland's east side, about 10 miles from Latvian Cleveland CU, which is on the city's west side in a 100-year-old Latvian church. "We both are very proud cultures. So to hear of one bad apple brings sadness, shock and disbelief to all," said Foraker.
Foraker said she knew very little about Spirikaitis, and that based on her attempts over the last five years to contact him, Spirikaitis kept to himself. "I had reached out to him three or four times to join me and other credit union CEOs at breakfast meetings, but he never returned my calls. So I gave up. I did meet him once at a meeting with a data processor, and he seemed to be a very different individual."
In The Bulls-Eye
Eaton Family CU CEO Mike Losneck is concerned the two instances of fraud will have examiners placing a big bulls-eye on Cleveland-area credit unions.
"Ever since St. Paul, things have gotten tough for all Cleveland credit unions, in my opinion. Examiners question all kinds of things they never questioned before," Losneck said. "It often seems like we are working more for the examiners than for the members. This business at Taupa Lithuanian won't help."
Eaton's main office is 30 blocks away from TLCU, and within a week of TLCU's liquidation the $60 million EFCU had signed up seven members from the failed credit union. "We are getting ready for the checks from NCUA," said Losneck.
The TLCU fraud apparently came as a big shock to the failed credit union's board, according to Losneck's experience with the former CU's directors. "From the last conversation we had with some of the board members, they were really excited about growing the credit union, adding services and doing good things for the membership."
