Federal agents searched more than two-dozen homes and businesses of former officers of D. Edward Wells FCU last week as a criminal probe of the failed community development credit union widened, a year after the troubled institution was shuttered by NCUA.
Agents from the FBI, the Internal Revenue Service and the Department of Housing and Urban Development removed boxes of documents from the home of former credit union president Carol Aranjo, and from the home and business of former director Norma Baker, as well as other individuals involved with the credit union, which was the only African-American-owned financial institution in western Massachusetts when its was closed last May.
The federal agencies would not disclose the nature of the investigation, only confirming the searches. Mary Ann Lane, a Springfield attorney who represented the credit union in last year's challenge to the NCUA takeover, confirmed that search warrants were served, but insisted the searches and removal of document did not qualify as "raids." "If you use that word you will get sued for defamation, I guarantee you," she said.
An individual familiar with the investigation told The Credit Union Journal the probe is focused on the possible misappropriation of funds. At the center of the investigation is the relationship of the credit union with a local African-American group of supporters called Friends of the Credit Unions-or FOCUS-which both lent money to the credit union in the form of non-member deposits, and borrowed money.
Loan Represented 424% Of Net Worth
Documents submitted to the court last year in connection with NCUA's conservatorship show the credit union made an unreported and unsecured $2-million loan to FOCUS, which amounted to 33% of the credit union's assets and 424% of its net worth. As much as $750,000 of the loan was outstanding when NCUA closed the credit union last year. The documents also showed the credit union transferred $150,413 from the FOCUS account to the personal account of Carol Aranjo to help her bring her own account into balance.
Officials of FOCUS could not be reached for comment and the group is not listed in local telephone books or with the Massachusetts Secretary of State.
Aranjo could not be reached for comment.
D. Edward Wells FCU was chartered in 1959 to serve the minority community in Springfield. It grew to be one of the best known community development credit unions in the country and Aranjo, who managed the credit union for 15 years, became nationally prominent as the chairman of the National Federation of Community Development CUs.
But when NCUA took the credit union under conservatorship they found mismanagement and potential criminal behavior, according to the court records. NCUA eventually shut the credit union, then sold the remaining assets and accounts under a purchase and assumption agreement last May to Western Massachusetts Telephone Workers CU, located nearby in Springfield.
