NCUA Bans Former Melrose Credit Union Lawyer

The former general counsel and board member of the liquidated Melrose Credit Union and a former loan manager of an Indiana credit union were banned from participating in the affairs of a federally insured financial institution, the NCUA said Friday.

Mitchell Reiver, who served as general counsel and as an assistant secretary on the Melrose CU board of directors through the end of 2016, signed an NCUA prohibition order in October. According to the federal agency’s prohibition order, there were “reasonable, just and adequate grounds” to ban the lawyer, but it did not specify any reasons for the ban.

However, the prohibition order said that Reiver denied that “said grounds exist,” but he agreed to the prohibition order to avoid the costs of administrative litigation, according to the NCUA.

As the credit union’s lawyer, Reiver was paid $313,344 in 2016, Melrose’s IRS 990 documents show.

Reiver, who has been practicing law since 1987, did not return a CU Times phone message seeking comment Friday.

The NCUA liquidated the $1.1 billion Melrose Credit Union in September after the Briarwood, N.Y. credit union lost $744.6 million over the past three years. The credit union managed the industry’s largest portfolio of taxi medallion loans, which were used as collateral by taxicab operators. But fierce competition from Uber, Lyft and other ride-sharing services caused the medallion values to drop substantially from a high of $1.3 million in 2011 to less than $200,000 in June, leading to demise of Melrose and several other credit unions that also managed sizable taxi medallion loan portfolios.

About a month before Melrose was liquidated, the NCUA filed administrative charges against Alan S. Kaufman, accusing the former Melrose president/CEO of allegedly violating laws and his fiduciary duties. The federal agency 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.

The NCUA also banned Michelle Cain, 47, who was a former loan manager for the $38.2 million Business and Industrial Federal Credit Union in Columbus, Ind.

She pleaded guilty to theft in April and was sentenced by a U.S. District Court judge in August to a year and one day in federal prison. Cain also was ordered to pay $466,122 in restitution.

According to court documents, Cain stole the money from the credit union by using her position to obtain 103 loans using fake accounts or inactive accounts. When the old loans came due for repayment, she took out new bogus loans and was making about $12,000 a month in loan payments.

From February 2013 to May 2017 when Cain was fired, she falsified about two loans a month. The former loan manager remarked in court documents that even though the credit union was audited twice a year, she was surprised that it took as long as it did for the fake loans to be detected.

Cain said she used the credit union funds to buy “tons of clothes” for herself because it made her feel good, according to court documents.