ALEXANDRIA, Va. – A new report issued by NCUA Friday says there was virtually no oversight by the board or supervisory committee of Central Valley FCU as the CEO of the $8 million, low-income credit union stole some $9 million over the years to finance her personal business and other expenses.
The report by the NCUA Office of Inspector General found little evidence that the supervisory committee did any work other than to contract for an annual external audit. NCUA examiners and the Inspector General found the credit union’s internal controls were “non-existent.”
The lax oversight facilitated in one of the biggest credit union CEO embezzlements ever, which went undetected by NCUA examiners for as long as four years, according to the new report.
NCUA closed the 25-year-old Wheeling, W.V., credit union in February 2009 and since then its president and CEO, Bernie Metz, pleaded guilty to the scheme, which financed her family’s purchase of a local inn and restaurant, among other things. NCUA estimates the failure will cost the National CU Share Insurance Fund at least $16.4 million.
The new report shows NCUA gave the credit union a CAMEL 1 rating, its highest, all the way into 2005, when the fraud already was being conducted. Even through March of 2008 the CAMEL rating was a 2.
Among the Inspector’s findings were that if NCUA had taken stronger supervisory actions regarding the credit union’s lack of internal controls, NCUA might have mitigated the losses accruing to the NCUSIF.
Among the red flags NCUA discovered were: missing deposits/shares; back-dated transactions; CD discrepancies; and, fraudulent loans, deposits and withdrawals.
“We determined NCUA examiners did not adequately evaluate the risks to Center Valley’s operations. Specifically, examiners did not thoroughly evaluate the credit union’s internal controls when assessing transaction risk and management CAMEL ratings,” said the report. “As a result, NCUA missed opportunities to expand examination procedures that may have detected the fraud sooner and mitigated the loss to the NCUSIF caused by Center Valley’s failure.”
