Margurite M. Cofell denied most of the allegations by the NCUA that she stole millions while she was the CEO of a the $51 million St, Francis Campus Credit Union in Little Falls, Minn., according to court documents her lawyers filed U.S. District Court in St. Paul on Monday.
However, Cofell acknowledged she drafted a written confession about how she carried out her embezzlement scheme.
An NCUA civil lawsuit alleged that the 60-year-old woman of Little Falls, Minn., embezzled $2.8 million over 15 years. However, Cofell allegedly began stealing from the credit union in the mid-1990s, which led to a total loss that likely exceeded $10 million, according to a forensic auditor's report filed with the lawsuit.
“Cofell admits that there was an examination by the NCUA on January 23, 2014 and that NCUA initiated an investigation at that point,” Cofell's lawyers wrote in answering the NCUA's allegations. “Cofell lacks knowledge or information sufficient to form a belief about the truth of the allegation regarding the forensic report by Lillie & Company.”
She also denied the NCUA's allegations of civil theft, fraud and misrepresentation, unjust enrichment, conversion and failing to perform her fiduciary duty.
St. Francis Campus CU was closed by state regulators in February 2014. At that time, the local police and the FBI launched an investigation but no charges have been brought against Cofell. In other cases in which credit unions have been closed after embezzlement is uncovered, it may take several years for federal authorities to file charges.
When the former CEO in 2014 admitted in writing after confronted by NCUA examiners that she began her scheme 15 years ago, a forensic auditor, Lillie & Company in Sunbury, Ohio, hired by the federal agency was only able to obtain complete transactional documentation from 2011 to 2014 because Cofell allegedly destroyed the data processing system's back up information prior to 2011.
“It appears as if Ms. Cofell was engaged in a scheme to defraud the credit union from at least the mid-1990s up to the time at which when she was suspended on Jan. 23, 2014,” according to court documents. “While Ms. Cofell purged much of the earlier financial detail, member statements in connection with a number of fictitious accounts showed the existence of fictitious loans well in excess of $1 million as of 2000 thereby suggesting that the scheme had been ongoing for some time prior to 2000.”
In Cofell's answer to the NCUA's lawsuit, she acknowledged her written confession was drafted by her and that the “document speaks for itself.”
Cofell allegedly fabricated loans under inactive or fictitious member accounts. The funds from these loans went into her own account, her boyfriend's account and accounts of her family members.
Cofell admitted she added certain loans to inactive member accounts, but she denied funneling the loan funds to her own account, her boyfriend's accounts of her family members, according to court documents.
To conceal the financial losses, Cofell allegedly manipulated the general ledger and other accounts to make it appear that cash deposits of members were being converted to short-term investments of low interest rates to loans to members at higher interest rates. She also manipulated the books to hide delinquencies of fraudulent loans.
Cofell also denied these allegations.
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