Former CU CEO Sentenced to Prison for Stealing More Than $1.2 Million
Prosecutors say executive’s deception and lies took a toll much higher than a dollar figure.
A federal judge sentenced Sherry Ann Allen to four years in prison Tuesday for stealing more than $1.2 million from the Greater Eastern Credit Union in Johnson City, Tenn.
U.S. District Judge Ronnie Greer also ordered the former CEO to pay $1,237,547 in restitution and to serve three years of supervised released after completing her prison term. Allen, 49, pleaded guilty in June to theft and tax evasion.
In their sentencing memo, federal prosecutors said Allen had two personas, one who worked her way up through the ranks at GECU to become a productive executive who was not only respected by her co-workers, but also loved by many throughout the community. The second persona, however, was involved in a complicated, sophisticated, multiyear scheme to steal money from GECU. She was so successful at stealing from the credit union, prosecutors wrote, because she was trusted — absolutely.
When confronted with the theft, Allen immediately confessed. She fully cooperated with investigators and voluntarily surrendered assets bought with the stolen money.
“The defendant seems genuinely remorseful, however, the defendant’s true feelings are difficult to guess, given how effective she was in playing the role of caring friend and compassionate and trustworthy coworker,” prosecutors wrote in court documents. “She betrayed the employer who had placed so much faith in her. She lied to family and friends who now understandably feel fully betrayed and devastated. Her deception and lies took a toll much higher than a dollar figure.”
Allen stole funds 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 used 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. She also helped friends financially when they were in need and helped take care of her aging parents.
The alleged theft was initially exposed in February when the $55.3 million, 4,388-member 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 was 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 enabled Allen to deposit and move large money transfers that would not be detected or reviewed.