Second Lawsuit Filed Against Liquidated Kentucky CU

A civil lawsuit claims the liquidated Louisville Metro Police Officers Credit Union allegedly failed to act in the best interests of their members in hiring and retaining an employee who is at the center of an investigation.

The lawsuit, filed July 18 by three former members in U.S. District Court in Louisville, Ky., names Josephine Crowe, the credit union’s former vice president and loan officer. The former members India Moore, Enrico Clarkson and Antonio Brown, claimed that LMPOCU took an unreasonable risk of hiring and retaining Crowe.

This is the second lawsuit filed against LMPOCU. In March, two other members claimed in their lawsuit that Crowe and other employees may have been involved in alleged financial improprieties.

Over the last three quarters, the $21 million credit union posted losses of more than $7.3 million, according to its NCUA financial performance reports.

Crowe’s Louisville-based attorney Thomas Clay declined to comment about the lawsuits’ allegations when contacted earlier this week by CU Times. Crowe has not been charged with any wrongdoing.

The July lawsuit claimed that before LMPOCU hired Crowe, she filed for bankruptcy twice, had numerous debt collections and the IRS seized thousands of dollars from her bank accounts. Crowe also had a house in the process of foreclosure, along with federal and state tax liens as well as numerous judgement liens filed against her. Moreover, there was a civil judgement entered against her by another credit union and she voluntarily surrendered a vehicle in lieu of repossession, according to the lawsuit.

After Crowe was hired, her house was foreclosed, while numerous state and local tax liens continued to be filed against her and she had more debt collection actions taken against her in court, according to the lawsuit.

Because all of this information is available as public records, the lawsuit said that LMPOCU failed to act in the best interest of members by not taking reasonable steps to determine whether Crowe should have been trusted with the life savings, finances and credit worthiness of public servants and their families.

The lawsuit also alleged that LMPOCU failed to adequately supervise Crowe and placed her in positions that “all but guaranteed Crowe would improperly oversee and control members’ finances and money; and furnished inaccurate information about members to credit reporting agencies.”

The lawsuit alleged that Crowe used her position to unlawfully access member accounts or credit information to set up fake loans in members’ names without their consent, diverted members’ electronic transfers to other accounts, failed to pay off loans and engaged in other improper allocations and misappropriations.

The former loan officer also allegedly reported inaccurate information about members’ loans to credit reporting agencies that impaired their loan activity and credit history, according to the lawsuit.

The lawsuit filed in March made similar allegations against Crowe.

The NCUA conserved LMPOCU in December after the Kentucky Department of Financial Institutions disclosed that it had turned over to the FBI an investigation of alleged internal theft. By June, state regulators decided to appoint the NCUA to liquidate the credit union that lost more than $3.4 million in 2017, $1.7 million by the end the first quarter of this year, and $2.1 million at the end of the second quarter, according to NCUA financial performance reports.

The $1.1 billion Commonwealth Credit Union of Frankfort, Ky. assumed LMPOCU’s membership, shares, loans, and all other assets.