A retired police officer and office manager of the merged Portland Maine Police Department Federal Credit Union was sentenced Monday to 12 months and one day in prison for embezzlement and falsifying NCUA Call Reports.
U.S. District Court Judge Nancy Torresen in Portland also ordered John C. Barry, 69, to pay $533,791 in restitution and to serve five years of supervised release following his prison term.
Between 2009 and December 2013, Barry embezzled from credit union accounts by transferring funds into accounts for him and his family members. They used the stolen funds to pay for personal expenses, according to court documents.
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After he was honorably discharged from the U.S. Coast Guard in 1970, Barry was hired as a patrol officer for the Portland Police Department. He worked as a police officer for 27 years until his retirement in 1998. In the mid-1990s, he started working as a part-time clerk at the credit union and later became its office manager, according to court records.
In 2009, William J. Murphy, the former CFO for PMPDFCU, informed Barry that the credit union's net worth was 4%, or undercapitalized.
To avoid NCUA scrutiny, Barry moved money out of certain members' accounts at the end of a month and then moved the money back at the beginning of the next month to increase the credit union's net worth, according to court documents filed by assistant U.S. Attorney Donald E. Clark.
Murphy told the FBI that he thought the manager moved three or four checks per month. After the manager moved the funds, Murphy drafted the NCUA Call Report.
The former CFO said he knew he was submitting false information to the NCUA and did it to keep the credit union afloat, Clark said.
When an FBI agent confronted Murphy about falsifying NCUA Call Reports, he said, "We all make mistakes," according to court documents.
Murphy, 75, of Gray, Maine, pleaded guilty in October to making false federal credit union entries in U.S. District Court in Portland. However, Murphy was never sentenced because he died in December of coronary heart disease, according to court records.
In November 2013, NCUA examiners uncovered suspicious activity during an audit. Barry was then placed on administrative leave.
The NCUA audit found unauthorized disbursements from member share accounts, out-of-balance conditions on bank reconciliations and the suspense account, as well as questionable deposits and withdrawals on the manager's personal and related family member accounts, according to Clark.
Barry was unable to provide supporting documents on the transactions in question. The suspense account had several material debits and credits that were unexplained, and had a material credit (liability) balance.
NCUA examiners were told the credit union's management had an agreement with several members to withdraw and redeposit shares to lower total assets and liabilities, and therefore maintain a higher reported net worth for regulatory purposes.
A preliminary audit of the accounts involved revealed about $369,064 was missing from four members' accounts, and that the manipulated monthly account transactions affecting net worth typically exceeded $200,000.
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Peter Strozniak
Credit Union Times reporter covering credit union operations, fraud, M&As, leagues, business continuity, and breaking news.
