NCUA Charges 'Dishonesty' & 'Unfitness to Serve' Against Former CU CEO

The former CEO of New York’s Melrose Credit Union leveraged his position to brazenly obtain everything from a rent-free home, trips abroad to even limousine service for his relatives, the NCUA charged Tuesday.

The NCUA, in filing the administrative charges against Alan S. Kaufman, provides a litany of allegations against the former executive, who was removed from his positions at the credit union in 2016.

“These practices and breaches involved personal dishonesty by Kaufman and demonstrated Kaufman’s unfitness to serve as a director, officer, and to otherwise participate in the conduct of the affairs of an insured credit union,” the charges state.

The documents state that the Melrose board was unaware of any of Kaufman’s alleged action.

In one instance, according to the charges, Kaufman actively solicited a free trip to the 2013 Super Bowl from CBS Radio. But CBS radio officials told Kaufman that the credit union had not spent enough money with the stations to justify the free trip.

“You better tread carefully here, (redacted),” he replied, according to the charges. “I spent $620K last year and committed over $240K just last week. My patience is growing thin and time is running out.”

CBS came through with the free trip.

The New York Department of Financial Services took over the credit union last year. Melrose was heavily involved in making loans using taxi medallions as collateral in New York, Chicago, Philadelphia and Miami. As Uber and other services have grown, the value of those medallions has dropped.

The NCUA is using a rarely used authority to seek a prohibition order against Kaufman and is requesting that he be ordered to pay restitution of at least $3.5 million and a civil penalty of at least $1 million.

For decades, the Kaufman name was synonymous with Melrose. Alan Kaufman’s grandfather helped found the credit union in 1922 and served as its CEO, as did Kaufman’s father.

Alan Kaufman joined Melrose in 1984 and became CEO, treasurer and a member of the board before being removed as CEO in 2016.

The charging documents provide details of how Kaufman allegedly used Melrose as leverage to finance a comfortable lifestyle. The documents charge that Kaufman:

• Repeatedly solicited and obtained free luxury trips from vendors such as CBS Radio, the New York Jets and Madison Square Garden. They included CBS Radio’s free “World Trip to Paris” (2010); MSG’s free trip to Stockholm; Sweden to watch the New York Rangers play hockey (2011); CBS Radio’s free Trip to Hawaii (2012), MSG’s free trip to “The Voodoo Event” (concert series) in New Orleans (2012); CBS Radio’s free trip to the Super Bowl in New Orleans (2013), the New York Jets’ free trip to San Diego to watch the Jets play the Chargers (2014); the New York Jets’ free trip to Chicago to attend the VIP “2015 NFL Draft Experience,” and the New York Jets’ free trip to Dallas to watch their game against the Cowboys.”
• Signed a $2 million a year naming rights agreement with a company, that, when he began experiencing financial difficulties, purchased a “dwelling” for him for $630,000 and never charged him rent. Kaufman allegedly told the credit union board that other credit union employees thought the naming rights agreement was a good idea.
• And another person established Briarwood Transfer Services, a third-party broker of taxi medallions. The company was located in Melrose’s offices and Kaufman spent time on Briarwood business, unbeknownst to members of the credit union board.
• Entered into a consulting contract with his father when he retired from the credit union and paid him $6,500 a month. Kaufman was the only person responsible for monitoring his father’s work and by the time Alan Kaufman was terminated, only one of the members of the credit union’s board had been on the board long enough to recall the contract being signed. As part of his consulting contract, Melrose paid for his father’s and stepmother’s airfare, hotels and meals to meetings as well as personal vacations.
• Allowed his spouse, children, father and stepmother to charge limousine travel to a corporate account.