Linda Susan Newcomb, former manager of the failed Lynrocten Federal Credit Union, was indicted Wednesday for embezzlement, bank fraud and aggravated identity theft charges, the U.S. Attorney's office in Lynchburg, Va. said.
Newcomb, 62, of Madison Heights, was charged with one count of embezzlement, four counts of bank fraud and three counts of aggravated identity theft for her alleged involvement in a $10 million loan fraud scheme that led to the collapse of the of Lynchburg-based $13.8 million cooperative in May 2013.
Teresa Wieringo Humphries, a former head teller at the failed cooperative pleaded guilty in January to embezzling more than $1 million. Humphries, 58, of Madison Heights, also admitted participating in the fraudulent scheme with Newcomb.
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The indictment alleges Newcomb and Humphries began the fraud scheme in 2000. They originated loans in the names of LFCU members without those members' knowledge or consent. They also drafted fictitious loan documentation and approved the fictitious loans in order to make them look legitimate.
The indictment also charges that Newcomb and Humphries transferred funds and wrote checks on certain LFCU members' accounts without their knowledge or consent. At least three different accounts are alleged to have been used by the two defendants. Certain proceeds from the schemes were deposited to the LFCU bank accounts of Newcomb, Humphries and their family members, or were used by the two defendants to make payments to other fraudulent loans.
What's more, the indictment also alleges that from Oct. 22, 2009 and continuing to Oct. 6, 2011, Newcomb entered into loan participation agreements with another federal credit union.
Newcomb, on behalf of LFCU, sold various fraudulent loans. In order to persuade the partner credit union to enter into the loan participation agreement, Newcomb made various false statements to make the loans involved appear to be authentic and legitimate. The value of the fraudulent loans this scheme was in excess of $1 million, according to the indictment.
The loan participation agreement is in reference to a $1.7 million civil lawsuit filed last year by the $20 million Northern Piedmont Federal Credit Union of Culpeper, Va., which accused Humphries, Newcomb and another Lynrocten FCU Teller Becky Nichols of loan participation fraud.
Northern Piedmont seeks to recover almost $1.7 million, according to the civil complaint.
Court papers show Northern Piedmont wired more than $3 million to Lynrocten from 2009 to 2011 under agreements based on fraudulent misrepresentations.
"Newcomb and Humphries concocted a scheme to originate loans, allegedly including the loans in which Northern Piedmont purchased participations, in members' names without the members' authorization," the complaint stated.
In April 2013, a judge ruled the NCUA could intervene in the Northern Piedmont lawsuit because it is premature and could potentially deplete the pool of assets available to all parties. NCUA closed the credit union in May 2013 because it was no longer viable.
Humphries is scheduled to be sentenced Sept. 23. She faces up to 30 years in prison and/or a fine of up to $1 million.
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Peter Strozniak
Credit Union Times reporter covering credit union operations, fraud, M&As, leagues, business continuity, and breaking news.
