MADISON, Wis. – CUNA Mutual Group’s CUMIS Insurance Society, which insures the vast majority of credit union executives in the country, has been stiffening its resolve in recent days to seek recompense from managers suspected of theft or embezzlement for which CUMIS has paid out an insurance claim.
In several cases CUMIS paid the claim even through no criminal charges were filed against the alleged wrongdoers.
In the latest effort, CUMIS filed suit last week against former manager and assistant manager of Lawrence County School Employees FCU for allegedly embezzling more than $900,000 from the tiny New Castle, Penn., credit union by crediting their accounts with fictitious deposits and phony payments against their personal loans.
The suit was preceded by a couple of days by a suit filed by CUMIS against the former vice president of Chaffey FCU for paying as much as $1 million in personal expenses from credit union funds.
And days before that CUMIS sued the former CEO of BVA FCU, a small Pennsylvania credit union. Claiming the executive misappropriated $265,000 from the credit union by having the credit union pay his personal expenses.
In all three cases CUMIS claims the financial improprieties were discovered by NCUA examiners and were subsequently corroborated by forensic audits conducted by the credit unions.
CUNA Mutual did not immediately respond to requests for comment. But in other recent cases the credit union insurer said it will seek to recover funds from wrongdoers because the payouts ultimately come out of the same pockets, those of the mutual insurer’s policyholders.
In the case of Lawrence County Employees FCU the alleged fraud conducted by the two top managers, the credit union’s only employees, was the main cause of the failure of the $2.6 million credit union, which was liquidated by NCUA in March 2010.
NCUA’s Inspector General reported a year ago that insider fraud is a growing cause of credit union failure and that the credit union regulator was working with criminal investigators on fraud investigations surrounding as many as a dozen credit union failures.
