SPRINGFIELD, Mass. – The relationship between NCUA and once-prominent community development credit union D. Edward Wells FCU became so frayed at one time Carol Aranjo, president of the now-defunct CDCU, tried to have NCUA examiners legally barred from entering the credit union, witnesses testified during Aranjo’s trail on fraud and conspiracy charges last week.
Around 2000, as NCUA was trying to audit the books, Aranjo’s relationship with then-NCUA Regional Director Layne Bumgardner became so acrimonious she began barring examiners from credit union records. Aranjo even tried (unsuccessfully) to get a legal injunction to keep the federal regulator at bay in 2002, witnesses testified.
Prosecutors allege Aranjo, the once national spokesman for CDCUs, transferred more than $150,000 from members’ accounts to cover negative balances in her and her husband’s accounts. She also is accused to making hundreds of thousands of dollars in loans to unqualified family and friends that were never repaid.
Former board member William Zachery last week testified he made a list of missing loan files during an audit of the credit union in 2000. Among the missing files were Aranjo's mortgage, loans under her two sons' names and a loan to a former fraternity brother of board member Michael Akers, according to Zachery. Others were incomplete, lacking loan applications and other important paperwork, he said.
Aranjo and her husband, Alphonso Smith, and their son, Douglas Smith, were charged with fraud, conspiracy and tax evasion in an 85-count indictment. The case took a tragic turn last November when Douglas Smith drowned in a boating accident.
Aranjo, who was chairman of the National Federation of CDCUs, came to national prominence in the 1990's when she emerged as a spokesman for community development financial institutions, an initiative championed by the Clinton administration.
NCUA liquidated the 44-year-old D. Edward Wells FCU in 2003 at a loss of more than $2 million to the National CU Share Insurance Fund.
The trial is scheduled to resume Tuesday morning in U.S. District Court for the Western District of Massachusetts.
