Former D. Edward Wells CEO Carol Aranjo, once a national figure in the community development banking movement, was charged in federal court with looting the now-defunct credit union in a sophisticated fraud scheme over several years that culminated in the 2003 failure of the institution.
The 65-year-old Aranjo, her husband Alphonso Smith, 67, and son Douglas Smith, 46, were arrested at their homes by federal agents on July 7 and brought into court to face charges of conspiracy to commit embezzlement, embezzlement and filing false tax forms in an 86-count indictment. All three pleaded innocent at their arraignment.
Rose To National Prominence
Aranjo, who rose to national prominence when she served as chairman of the National Federation of CDCUs, ran the credit union until it was taken under conservatorship by NCUA in February 2003. NCUA, which fought Aranjo in court to gain access to the books, found the credit union actually had less than half of the $5 million in assets reported by Aranjo and the credit union board. The agency, which reported a $3.2 million loss to the National CU Share Insurance Fund, sold the credit union's assets and accounts later that year to nearby Springfield Telephone Workers CU.
The federal indictment mirrors a civil suit brought earlier this year by NCUA and claims that Aranjo milked the credit union for the benefit of her family members and friends, then cooked the books to fool NCUA examiners. It also alleges that she fraudulently approved a $2 million line of credit to an organization affiliated with D. Edward Wells FCU called Friends of the Credit Union, a non-profit organized to benefit local minority groups.
Aranjo did not return phone calls seeking comment last week.
The indictment also charges Alphonso Smith with defrauding the credit union and three commercial lending institutions by submitting fraudulent loan applications and false verifications of employment in order to obtain mortgage loans.
Smith could not be reached for comment.
Douglas Smith, the son of Aranjo and Alphonso Smith, was also charged with submitting a false bid for the construction of seven houses in Springfield. Douglas Smith was also charged with making a false claim to the Department of Housing and Urban Development's HOME Program for $10,000. The three were each released pending trial on a $100,000 unsecured bond. If convicted on these charges, each defendant faces up to 30 years' imprisonment, to be followed by 5 years of supervised release, and a $250,000 fine.
D. Edward Wells FCU was chartered in 1959 to serve the African-American community of Springfield, an economically depressed suburb about an hour west of Boston.
Testifying Before Congress
Aranjo gained national explosure when she chaired the National Federation of CDCUs, testifying before Congress several times on issues such as community development lending and predatory lending as Congress was authorizing the Community Development Financial Institutions Fund. Under Aranjo, the credit union was also one of the first to develop a youth savings program.
Aranjo was among a dozen prominent credit union figures who joined President Clinton in the Oval Office for the August 1998 signing of HR 1151, the CU Membership Access Act, into law.
She also won numerous local and national awards for her advocacy of minority lending and financial literacy for youth.
A Regular Critic
Aranjo was also a regular critic of the mainstream credit union movement, criticizing large expansive credit unions and even asserting racial insensitivity in instances, such as in the 1999 liquidation by NCUA of North Carolina's oldest African-American credit union, Bricks NC Community FCU.
However, the often combative Aranjo eventually fell out of favor with the federation and was ousted from the board after an unusual internal battle.
