Former Minnesota Credit Union CEO Charged With $2.5 Million Fraud

More than five years after the financial collapse of a Minnesota credit union, its former president/CEO will appear in federal court to face allegations that she stole at least $2.5 million.

Margurite Mary Cofell will be arraigned on a credit union fraud felony charge in U.S. District Court in Minneapolis on March 28.

The FBI launched its investigation in January 2014, about three weeks before the Minnesota Department of Commerce closed the $51 million St. Francis Campus Credit Union in Little Falls on Feb. 14 and appointed the NCUA receiver and liquidating agent.

However, the fraud was not publicly exposed until January 2016 when the NCUA sued CUMIS over its controversial decision not to pay the federal agency’s fidelity bond claim. The NCUA filed a proof of loss with CUMIS for $3,086,755. CUMIS rescinded the fidelity bond agreement because Cofell lied on its application to extend the employee dishonesty coverage from $2.25 million to $2.75 million in April 2013. This lawsuit is pending in federal court.

A forensic auditor hired by the NCUA alleged Cofell’s embezzlement scheme caused a loss of more than $10 million, leading to the collapse of the credit union.

Even when the former CEO in 2014 admitted in writing after confronted by NCUA examiners that she began embezzling in the 1990s, the forensic auditor was only able to obtain complete transactional documentation from 2011 to 2014 because Cofell allegedly destroyed the data processing system’s back up information prior to 2011.

Though Cofell allegedly purged much of the earlier financial detail, member statements in connection with a number of fictitious accounts showed the existence of fake loans well in excess of $1 million as of 2000, which suggested that the scheme had been ongoing for some time prior to 2000, according to the NCUA.

Based on the transactional documentation from 2001 to 2014, the forensic auditor was able to determine Cofell allegedly embezzled $3 million.

In 2017, the NCUA also filed a $2.8 million civil lawsuit against Cofell who denied the federal agency’s allegations of civil theft, fraud and misrepresentation, unjust enrichment, conversion and failing to perform her fiduciary duty. This lawsuit is also pending in federal court.

On Feb. 15, federal prosecutors filed one felony count of credit union fraud against Cofell in U.S. District Court.

They alleged her scheme began in June 2006 and continued through January 2014 when she was fired.

The former CEO allegedly diverted the credit union’s funds and deposited that money into her accounts, member accounts and the accounts of family members and close friends. These members received a substantial portion of the funds diverted from the credit union, according to court documents. The approximate amount of that substantial portion was not revealed in court documents.

What’s more, Cofell allegedly used the accounts of unwitting credit union members to create fake loans or increase balances on legitimate loans.

Prosecutors alleged Cofell stole the funds from these phony loans to facilitate her fraud. For example, she used some of the fake loan money to conceal the fictitious deposits to member accounts, purchase credit union checks or fund the unauthorized removal of cash from the credit union.

On other occasions, Cofell allegedly used proceeds from the fraudulent loans to make payments on existing loans that were delinquent and to make payments on loans held by members with whom Cofell had personal relationships, according to court documents.

Federal prosecutors also allege the former CEO made unauthorized cash withdrawals from the credit union’s vault account.