Former CEO to NCUA: 'I Will Not Be a Scapegoat'
Alan Kaufman issues a statement regarding the NCUA's allegations that he violated laws and his fiduciary duties.
In a new statement to CU Times, Alan S. Kaufman said he will vigorously defend himself against what he described as misleading charges made by the NCUA against him.
“I will not be a scapegoat for the regulatory failures and technological disruptions that have destroyed the taxi medallion industry and those who financed it,” Kaufman wrote in a statement Friday. “I worked for Melrose for over 30 years as did my father and grandfather. My family and the loyal board of directors have always done business with integrity for the best interest of the Melrose members.”
His comment, sent in an email to CU Times on Friday, is in reaction to a rarely used NCUA authority that is seeking a prohibition order against Kaufman, which is requesting that he be ordered to pay restitution of at least $3.5 million and a civil penalty of at least $1 million.
NCUA’s prohibition order claims the former CEO of the $1.1 billion Melrose Credit Union in Briarwood, N.Y., allegedly violated laws and his fiduciary duties.
The NCUA charged that Kaufman accepted luxury trips from Melrose vendors, lived in a rent-free home from a vendor, misled the Melrose board about a $2 million naming rights agreement, used credit union funds that paid for non-business limousine trips for Kaufman and his family, maintained a contract that improperly used Melrose’s funds to pay for his father and stepmother’s airfare, hotels and meals, and converted the credit union’s resources for Kaufman’s personal gains.
When initially reached on Wednesday by CU Times, Kaufman claimed the federal agency’s charges were part of a “cover up” related to the NCUA’s mistakes over the taxi medallion meltdown.
Melrose was the industry’s largest lender for taxi medallions that have substantially declined in monetary value because of fierce competition from mobile phone app-based transportation providers such as Uber and Lyft. As a result, Melrose has lost hundreds of millions since 2016. Other credit unions that provide loans to taxi medallion owners also lost millions and so did credit unions across the nation that invested in taxi medallion participation loans. Kaufman is now working as an independent financial consultant in Jericho, N.Y.
The NCUA placed Melrose into conservatorship in February 2017.
Kaufman joined Melrose in 1984 and became CEO, treasurer and a member of the board in 1998. In July 2016, he was removed for cause by the Melrose board, according to the NCUA.
His termination came after a Melrose examination by state and federal regulators who found numerous violations of laws and regulations, and significant supervisory concerns. The examination prompted the New York State of Financial Services to issue a consent order against the credit union on July 8.
The consent order mandated Melrose CU take steps in at least 15 areas of the credit union’s operations to function with adequate management supervision and board oversight to prevent any future unsafe and unsound banking practices or violations of law or regulations.
Some of the operational areas included loan policy deficiencies, the funding of an ALLL shortfall, and a concentration reduction plan for its then underperforming $1.5 billion taxi medallion loan portfolio.
The consent order also required the credit union to establish an ethics and conflicts of interest policy for executives, board members and employees.
In less than 20 days, Kaufman must file his answers to the NCUA charges by either admitting to or denying them. He also can file an answer by stating there is a lack of sufficient information to admit or deny the charges.
If he fails to file his answers with the NCUA and the Office of Financial Institution Adjudication, Kaufman will be deemed to have waived his right to appear and to contest the allegations at the evidentiary hearing, which is scheduled for Sept. 28.