MADISON, Wis. – The former president of Rapids Municipal CU was charged by a federal grand jury Wednesday with manipulating the accounts of deceased members to help him steal $645,000 from the now-defunct credit union.
David Henke, 50, was charged in a 20-count indictment with depositing credit union funds into members’ dormant accounts then draining the funds from those accounts, and also converting CDs held by deceased members for his own use.
The embezzlement was uncovered after the failing credit union was acquired last December by nearby Bull’s Eye CU, which had been managing Rapid Municipal CU since Henke was fired in October, according to David Stark, president of Bull’s Eye. "The merger was pretty much completed when we discovered the situation," he told The Credit Union Journal yesterday.
"At the suggestion of the (Department of Financial Institutions) we said we’re going to go hire a forensic auditor," said Stark. "So we hired a forensic auditor to come in and research the situation further." Later, Bull’s Eye worked with the DFI and the law enforcement to complete the investigation that led to this week’s grand jury charges.
Bull’s Eye, a $120 million community chartered credit union that eked out a $70,911 first quarter net, will not only be faced with the losses from the embezzlement, but also from bad underwriting of loans at Rapid Municipal, according to Stark, who figured he may have to charge-off as much as $1 million of the merged credit union’s loans. "There’s going to be some suffering," he said.
But, he noted that the franchise for Rapids Municipal, which serves city employees, is solid and he hopes to convince the members to stay with the credit union.
Among the charges are that Henke approved loans for legitimate members without their knowledge, then used the proceeds himself. On several occasions he allegedly approved add-ons to members’ accounts without their knowledge then directed the additional loans to his own accounts.
The indictment also alleges that Henke concealed the scheme from those members whose accounts by removing the monthly credit union statements from the mail, thus preventing affected members from receiving the statements and discovering the unauthorized add ons to their loans.The FBI executed a seizure warrant on May 21 and seized approximately $84,686.88 from an investment account held by Henke where Henke allegedly deposited the stolen credit union funds.
Henke headed the one-time $8 million credit union since 1999.
