Angelo Stracuzzi, CEO and member of the board of the credit union, and Clifford Nilan, a board member, both resigned as board members on June 4. At the same time, Stracuzzi was put on a leave of absence as CEO. On June 11, Stracuzzi resigned as CEO.

Stracuzzi and Nilan resigned after the credit union learned that Stracuzzi, who served as CEO since 2003, had been arrested in 2004 in Biddeford, Maine, and found guilty in 2005 of assault and battery and criminal mischief. Questions arose about how the two men had handled the conviction.

The resignations and their circumstances also raised questions about how the credit union checked the backgrounds of its board members and senior officers and what obligations a credit union's board member or executive has to disclose criminal convictions that are not directly related to fraud or financial criminality.

According to media reports about the case, York County Superior Court in Alfred, Maine, sentenced Stracuzzi to 364 days in jail and a year's probation for the offenses. The jail sentence was suspended and the probation sentence was transferred to authorities in Massachusetts under an interstate compact that allows states to manage criminal justice affairs that cross state lines.

Pittsfield, Mass., is located in the far western part of Massachusetts, not too far from the border with New York. Biddesford, Maine, is about four hours away by car, located in the far southern toe of Maine that juts down between northern New Hampshire and the Atlantic seacoast.

Greylock declined to say how it discovered the convictions, but sources familiar with the case said it was the probation part of the sentence that led to the credit union to find out about the case.

On May 23, The Boston Globe published an investigative article into how the state's probation department conducted business, alleging widespread corruption, political patronage and general waste in the department. While the series did not address Pittsfield or the Stracuzzi case directly, it led to heightened interest among newspapers around the state about how the probation department handled its responsibilities in individual communities and that increased interest brought the matter of Stracuzzi and Nilan to light in Pittsfield.

Nilan is the chief probation officer for Pittsfield's Berkshire Superior Court, and the probation department initially confirmed and then denied to local media outlets that Nilan had been the officer in charge of Stracuzzi's probation that ran from July 1, 2005 to June 30, 2006. In addition to both being board members at Greylock, sources reported that Nilan and Stracuzzi had been friends for years, and this has raised questions of conflict of interest if Nilan had been Stracuzzi's probation officer.

Glenn Heller, a part-time Pittsfield resident and author of a Web blog called the Berkshire Blog explained that the scandal grew deeper because of the terms of the probation.

Heller reported, and court sources confirm, that Stracuzzi had been charged with patronizing prostitution with a minor, assault and battery charges and criminal mischief on two consecutive nights in July 2004, according to police reports. All charges are misdemeanors.

“The two minors were both boys, aged about 13 and 15 years, respectively,” Heller said, “and there were three charges in connection to each of them.”

The York County Superior Court has not yet provided records from each case. But court sources confirmed Heller's account of the charges and that one entire case and the patronizing prostitutes charge from the remaining case were dropped before Stracuzzi pleaded guilty to the remaining charges.

Because of the nature of the charges, the court imposed some terms on the probation, according to Heller and court sources. First, Stracuzzi was expected to get a psychological evaluation and to seek counseling if needed. Second, the court issued an order prohibiting Stracuzzi from having any contact with either of the two boys who brought the complaints.

“It's unclear whether Stracuzzi ever received the psychological evaluation or any counseling,” Heller said, “though we can presume he honored the no-contact orders since there have been no further complaints.”

John Bissell, a senior vice president at Greylock, said the credit union had disclosed the facts as it knew them to NCUA and its insurance company as soon as it learned them and that the CU would be revising its procedures for conducting background checks of its senior officers and board members.

Bissell said the CU conducts background checks of its senior officers and board members at the beginning of their tenure, but the board was now considering how to do them intermittently.

It's unclear whether Stracuzzi or Nilan necessarily had any legal obligation under NCUA regulations or insurance company bonds to report the convictions since they did not involve fraud or financial crimes.

“We generally tell credit unions they should conduct appropriate background checks and we also require that the individual be bondable, but we do not specify the nature or scope of a background check,” wrote John McKechnie, NCUA's director of congressional and public affairs. “Once they are serving at the institution, the credit union and the CU officer must follow the process set forth in IRPS 08-1.”

The agency's Interpretive Ruling and Policy Statement 08-1 says that the NCUA's regulations prohibit someone who has been convicted of a crime involving “dishonesty or breach of trust” or has participated in a pre-trial program involving a crime with “dishonesty or breach of trust” from having anything to do with running a federal credit union.

CUNA Mutual, the insurer for a large number of credit unions but not Greylock, said it also lacks hard and fast rules on whether and how it will insure a credit union's officers or board members.

“CUNA Mutual encourages all credit unions to administer background checks on personnel before hiring, particularly for senior positions within the organization,” the insurer said. “Most, if not all, fidelity bond policies have a termination of coverage condition that terminates coverage under the fidelity bond for individuals who have committed known dishonest acts. We provide our proprietary bond ability service for all CUNA Mutual bond customers as a means to assist in the background check that credit unions perform on employees.”

Bissell acknowledged the credit union faces a marketing and communications challenge in the wake of the resignations, even though he said members have been very supportive to the credit union's frontline staff.

“Like many other credit unions, our members have their contact with the CU through the frontline staff, and they have been nothing if not completely supportive,” he said.

Greylock did have a succession plan in place, and it named Marilyn Sperling, most recently the head of the credit union's mortgage lending department as CEO.

“Our established succession plan called for Marilyn Sperling to step in as interim president and CEO, and she is well prepared for the position,” said Board Chairperson Sheila LaBarbera. “During her 25-year career with Greylock, she has played a leadership role in nearly every facet of our business. She is strongly supported by an outstanding senior management team, which collectively offers more than 300 years of banking experience.”

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