Fraud Probed In CU Failure

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SANTA ANA, Calif. – NCUA is investigating allegations that manager fraud caused a failure at Mutual Diversified Employees FCU, a one-time $10 million credit union that was closed and folded into nearby giant SchoolsFirst FCU in February.

Documents filed in a civil suit allege manager malfeasance in the failure, with one member claiming his elderly grandmother, who is suffering from dementia, lost more than $175,000 of funds that were misplaced by the president of the credit union. In her suit, the member charged fraud, fiduciary abuse, elder abuse and unjust enrichment.

NCUA declined to comment on the case. “We do not comment on whether or not there’s an ongoing investigation in the event of a failure,” said John McKechnie, chief spokesman for the agency. A lawyer for the defendants in the civil suit did not return phone calls.

Mutual Diversified’s declining financial condition led to its closure and subsequent purchase and assumption by SchoolsFirst. At the time of the liquidation, Mutual Diversified has $6.1 million in assets and a $3.7 million loss for 2009 and negative net worth of $2.7 million.

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