Former CEO Pleads Guilty to $1.1 Million Theft

Sherry Ann Allen, the former CEO of the Greater Eastern Credit Union in Johnson City, Tenn., pleaded guilty to theft and tax evasion Wednesday in U.S. District Court in Greenville, Tenn.

Her sentencing hearing is scheduled for Sept. 26.

Although Allen faces a maximum prison sentence of 35 years and $1.1 million in fines, she is likely to receive a reduced sentence for her guilty plea and other considerations based on federal guidelines.

Allen admitted to stealing  more than $1.1 million from the credit union by using a hidden transaction feature, knowing no one reviewed hidden transactions, enabling her to move large sums of money into and out of accounts she controlled over seven years.

She admitted to using the stolen funds to pay for her credit card bills, her cars, her clothes, her jewelry, and she funded cruises and trips for her church’s youth group and credit union employees. Johnson also handed out expensive gifts to employees at GECU’s Christmas party and at its annual picnic.

The alleged theft was initially exposed in February when the $55 million GECU took the highly unusual step of publicly disclosing that a forensic fraud investigation determined Allen stole more than $1 million.

Allen joined the credit union in 1988 and appointed CEO in January 2014.

According to court documents, she began stealing funds in 2011 after racking up credit card debt.

The former CEO stole money by altering the amount due on invoices to reflect a higher amount due than the actual lower amount that was due. After the credit union cut a check for the higher amount, Allen personally processed the check, paid the actual lower amount that was due to the vendor and then deposited the difference into her account

Federal prosecutors revealed that Allen accomplished this by manually processing the payment and checking off a hidden transaction box. The hidden transaction box is legitimately used when an employee makes an inadvertent mistake such as depositing a check into a wrong account. Employees check off the hidden transaction feature after correcting a mistake in a timely manner so that the account holder would never know the error occurred. In addition, a hidden transaction would not show up on a member’s bank statement.

Allen used the hidden transaction feature to divert funds to accounts she controlled and to ensure no one at GECU could detect the transactions. According to court documents, Allen knew no one at the credit union reviewed hidden transactions, which enabled her to move money in and out of accounts.

What’s more, Allen and her family held multiple accounts, and she electronically marked these accounts as such. That meant those accounts would not be subject to review by any GECU employee, according to prosecutors. That allowed Allen to deposit and move large money transfers that would not be detected or reviewed.