Ignacio Morales, former CEO of the $7 million Borinquen Federal Credit Union, pleaded guilty Sept. 4 to embezzling $2.3 million and causing the institution's 2011 collapse. And, according to court documents, a former board member may also be guilty of defrauding the community development credit union.
Morales admitted to fraud, embezzlement, money laundering, failing false income tax returns and possession of cocaine with intent to distribute. He faces 10 years in prison at his Dec. 7 sentencing, but that time could be reduced in exchange for cooperating with investigators, local Philadelphia media reported.
His primary fraud scheme was cashing fake IRS refund checks, collecting 20% of the face value. Prosecuting Attorney Arlene Fisk told the court that at one time, Morales was earning $50,000 a month in kickbacks from just one person who cashed nearly a dozen fake checks per week.
In a related scheme, prior to 2008, Morales created transactions that made it appear the fake IRS refund checks had been deposited into a board member's account, and then promptly withdrawn. Then, from about July 2009 through June 24, 2011, Morales allowed that same board member to withdraw money from accounts until they were overdrawn to the tune of $500,000, court documents stated.
Morales "intentionally deleted evidence of the deficits" when providing documents to the NCUA examiners, prosecutors said.
According to Borinquen's listing on usacreditunions.com, which takes its data from NCUA Call Reports, as of December 2010, the Philadelphia-based credit union had just one male board member, Miqueas Santana. A woman who answered a call to the only phone listing for Miqueas Santana in the Philadelphia area said nobody lives there by that name. Other board members were Carmen Montalvo, Sandra Roman and Annette Rosa. Morales was also a member of the board, serving as treasurer, according to the website.
Fisk told Credit Union Times it is impossible to say when or if the government will proceed with charges against the unidentified board member.
Morales also admitted to several other serious crimes in which he abused his role as credit union CEO. Court documents alleged he withdrew more than half a million dollars from the credit union in an attempt to purchase 15 kilograms cocaine. Morales admitted in court that he intended to use his share of profits from the drugs to cover up his crimes and throw regulators off his trail.
He also allegedly took $600,000 from the credit union to purchase $1.2 million in real estate for personal use and stole $700,000 from an member who deposited $1.7 million at the credit union. He generated fake statements and misapplied credit union funds to pay dividends on the stolen funds to hide the crime, according to U.S. District Court charges, filed in Philadelphia.
The NCUA issued a cease-and-desist order against the institution on June 6, 2011, and ordered it to obtain a CPA audit as well as verify member accounts and reconcile financial statements. It was placed into conservatorship June 24. On July 8, the NCUA liquidated the institution and the $1.4 billion TruMark Financial Credit Union of Trevose, Pa. assumed what was left.
Borinquen was chartered in 1974 by a Catholic social service organization and served 8,600 members as of June 2011, according to an NCUA release. The low-income credit union served mostly Spanish-speaking members.
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